Scottish Sheriff Court Decisions

SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS at ABERDEEN

		Judgment in the cause
		McCalls Limited
		Pursuers
		Against
		Capture Imaging Ltd
		Defenders

Act:- McCallum

Alt:- Greig

Aberdeen, 28^th July 2009

The Sheriff, having resumed consideration of the cause:-

FINDS IN FACT

1.     The pursuers carry on business inter alia as retailers and hirers of highland dress and related accessories. They have places of business throughout Scotland and their head office is in Aberdeen. The defenders supply and sell copying, scanning, printing, faxing and document management equipment and are principal dealers in Aberdeen for Konica Minolta which manufactures equipment of that kind.

2.     In November 2005 Mr Colin Yule, a director of the defenders, contacted Mrs Denise Muir, Marketing Manager of the pursuers, by telephone and offered to supply to the pursuers new and updated copying and printing equipment for use in their Aberdeen premises. Mr Yule first phoned Mrs Muir and shortly thereafter visited her at her office. The pursuers were at that time using a Canon IRC 3200N printer (hereinafter "the Canon"). Mr Yule was aware of this as he had supplied that printer to them some years earlier when working for a different company. Mrs Muir expressed concern to Mr Yule that the performance of the Canon was beginning to deteriorate

3.     The pursuers used their printer, among other purposes, for the printing of promotional material in the form of brochures, letterheads and fliers in colour demonstrating the tartans they had available to sell or hire. Because of customers' wishes to plan for matching colours of dresses and parts of tartans for weddings it was of crucial importance to Mrs Muir that the colour accuracy of their printer was satisfactory to her own standards. Mr Yule was not told this and did not know it. He was however aware that the pursuers would use equipment to produce, among other things, prints of tartans that would be used for marketing purposes.

4.     At a meeting in her office in November 2005 Mrs Muir provided Mr Yule with information concerning the costs to the pursuers of the Canon. She provided him with the October 2005 invoice which the pursuers had received from their suppliers of the Canon and showed him the lease which the pursuers had for it. Mr Yule advised Mrs Muir that his company could supply a Konica Minolta Bizhub C351 (hereinafter "C351") all-purpose printing machine, which he said would provide better quality prints and would work out to be cheaper to run than the Canon. He told Mrs Muir that the Konica machines were "the best machines on the market" and that he could provide the pursuers with a machine that would "far exceed the quality of their current Canon" at no extra cost to the pursuers; he referred to the C351's durability, reliability and consistency of output. On 16^th November he provided Mrs Muir with a quote for a C351.

5.     At that meeting in Mrs Muir's office Mr Yule requested Mrs Muir to provided him with a compact disc of images she might want printed in order that he could show her the quality of prints the C351 could produce and enable her to make an educated choice. Mrs Muir provided him a set of five prints of men in highland dress which she had made from her computer. She also provided him with the compact disc she had produced containing the five images of men in highland dress and which had been used by her to produce the five prints on the Canon printer which she had given to Mr Yule. Mr Yule used the disc to produce a set of five prints of the same subjects on a C351. This disc is production 21 in the agreed bundle.

6.     Mr Yule requested the disc because he understood that the quality of the colour produced by their printer was important to the pursuers. He wanted to give Mrs Muir the opportunity to see what the C351 could produce in order to enable her to compare the C351's product with the Canon's and to make a decision as to the comparative quality of print.

7.     In early January 2006 Mr Yule met Mrs Muir and Mr Sandy Duthie, the financial manager of the pursuers, in a coffee shop in Waterstones's bookshop in Union Street Aberdeen. Before or at this meeting he provided them with a document headed "Proposal Benefits" (hereinafter "the proposal"). This contained information about the defender company, set out the current costs to the pursuers of the Canon. It set out the proposed cost to the pursuers of a C351 copier/printer and scanner and provided information in relation to maintenance, engineering standards, delivery and installation, and training. Appended to the written proposal were the two sets of prints referred to in paragraph 5 above. Mr Yule provided the set of prints to the pursuers to enable the pursuers to make their own decision on print quality. At that meeting he said that in his opinion the prints from the C351 were as good as or better than the prints from the Canon.

8.     In all that he said to the pursuers, whether orally or in writing, Mr Yule acted honestly, believing what he said to be true. So far as the statement that the Konica machine would provide better quality prints was concerned Mr Yule expressed this as being his opinion of the matter. So far as the statement that the defenders would provide the pursuers with a machine that would "far exceed the quality of their current Canon" was concerned, in making this statement Mr Yule had regard to the entire package including all aspects of the comparison between the Konica product and the Canon

9.     Mr Yule had based his statements other than on print quality on an objective assessment of (i) the features available on different photocopiers, (ii) the technical specifications relating to different photocopiers, (iii) aspects of the performance of different photocopiers including matters such as warm-up time, time for first copy and (iv) information provided by the pursuers as to the costs associated with the Canon. He had been provided with detailed information concerning the first three of these matters by Konica Minolta.

10. Mr Yule was entitled to rely on the information provided to him by Konica Minolta. In saying what he said on these matters to the pursuers he exercised reasonable care.

11. The statement which Mr Yule made in respect of quality of print was stated by him at the time to be an expression of personal opinion. It could not reasonably be considered by a reasonable customer to be a factual statement or representation. The decision as to quality of print was left to the customer and was taken by Mrs Muir

12. All of the statements made by Mr Yule were in respect of the performance of the C351 as a type of machine. With the exception of the opinion expressed by Mr Yule as to quality of print, the statements were based wholly or mainly on factual information. In respect of quality of print Mr Yule's opinion was that a C351 as a type of a machine would provide a better print than the Canon.

13. On 19 January 2006 Mr Duthie on behalf of the pursuers signed an agreement that the pursuers would buy from the defenders a C351 with a full system. The price to be paid was stated as "N/A". It was stated that the pursuers would lease the equipment, and that the leasing charges would be £2,999 per quarter fixed for thirty six months, with a term of sixty months and provision as to usage and price for excess copying.

14. It was never the intention of either party that the pursuers would buy a C351 from the defenders. It was always the intention that the pursuers would acquire the C351 by leasing it from a finance company as they had done with their Canon

15. On the same day and at the same time the pursuers entered into a hire agreement with HGFL Ltd, part of BNP Parisbas Lease Group (hereinafter together referred to as "BNP") to hire a C351 from BNP for a period of sixty months with payment of £2,999 per quarter. The rentals to be paid by the pursuers to BNP were shown on the contract to be based on a price for the C351 of £28,920.31 together with the amount required to terminate the pursuers' existing agreement in respect of the Canon machine of £21,063.02

16. Each of the two contracts was incorporated in its entirety brevitatis causa into the pursuers' pleadings. They together form production 2 of the joint bundle.

17. The pursuers entered into the two contracts partly on the basis of the acceptance by their finance manager Mr Duthie and their managing director Mr Hawthorn of Mrs Denise Muir's recommendation. Mrs Muir's recommendation was made on the basis of the proposal. This contained two sets of five copies each of prints of tartans one set produced by the C351 and one by the Canon from the same compact disc given to Mr Yule by Mrs Muir. Mrs Muir was able to make her own assessment of the quality of the prints produced by Mr Yule on the C351 and the prints produced by Mrs Muir on the Canon

18. The pursuers entered into the contracts partly on the basis of the representation made to them by Mr Yule that a C351 would be cheaper to run which oral representation was reflected in comparative costs contained in the proposal

19. The pursuers did not enter into either of the two contracts on the basis of any representation by Mr Yule as to the comparative quality of the prints of tartan which a C351 would produce and the quality of prints from the defenders' existing Canon machine.

20. In or around 27 January 2006 the defenders delivered a C351 to the pursuers premises and removed the existing Canon machine.

21. Almost immediately Mrs Muir expressed dissatisfaction as to the quality of the prints, complaining that they were poor, had a poor tonal range, were over-saturated with yellows, reds and greens, and that the colours were inaccurate and did not correspond with the colours seen on the screen of the computer from which the prints had been sent for printing.

22. The defenders supplied a replacement C351 machine in or about early May 2006 with the addition of a print controller. The pursuers did not consider that the quality of prints from this machine was acceptable for similar reasons.

23. On or about 31 May 2006 the defenders supplied a replacement Bizhub machine which was an upgraded model no. C352. The pursuers were initially not entirely satisfied with the quality of prints produced by this machine but after some "tweaking" were satisfied .

24. From about March 2006 to March 2007 the pursuers outsourced printing and incurred costs in respect of printing and hire of alternative equipment.

25. For part of the time when the pursuers were in possession of the Konica C352 machine they did not use it on the basis of advice from solicitors that they could not use it whilst they had a contract in respect of the C351.

26. None of the prints from either of the two sets of five referred to paragraph 17 was produced at the proof. No prints of any kind produced by either a C351 or the Canon from about November 2005 to 19^th January 2006 were produced at the proof. No prints from the C351 delivered to the pursuers on or about 27^th January 2006 were produced.

27. Of the prints which were produced and spoken to the prints comprising production s 18 and 19 were produced by Mr Raynor on a C352 using Mrs Muir's old laptop for one and her new laptop for the other. They were produced perhaps as late as May 2008. The five prints comprising production 22 of the joint bundle were produced by Mr Yule from the disc which is production 21 some time after the first C351 was delivered. They were printed on a different C351. The 19 pages of prints comprising production 24 were produced for the pursuers by Mr Booth sometime prior to June 2006 on the second C351 delivered to the pursuers using a disc (production 23) provided to him by Mrs Muir. According to the print out of this disc's contents (also production 23) it was created on 20^th March 2006.

28. Mrs Muir considered the prints on production 19 to be acceptable. At the proof she considered four of the five prints on production 22 to be acceptable. She considered the prints on production 24 to be unacceptable because in her opinion they did not give a true representation of the tartans.

.

FINDS IN FACT AND IN LAW

29. The statements made by Mr Yule as to the comparative quality of prints produced by the C351 and the Canon were an expression of opinion and not a representation of fact..

30. Mr Yule's statements other than in respect of print quality as to C351 compared to other equipment, including the Canon IRC 3200N were based on research into the specifications, capacities and programmes taken from information supplied by various manufacturers, and from the pursuers knowledge of Canon machines of that type and were not made negligently

31. The pursuers' assessment of the comparative quality of the Konica prints and the Canon prints in January 2006 took place after any representation had been made by the Mr Yule as to his opinion of the comparative merits of the prints and superseded that opinion

32. Mr Yule's expression of opinion as to the comparative merits of the prints of each machine did not induce the pursuers to enter into either or both of the contracts.

33. The statement contained in the Proposal that the C351 would be "fully operational on delivery" (a) was not a representation and (b) did not apply to print quality

FINDS IN LAW

34. The pursuers not having suffered any loss, injury or damage as a result of negligent misrepresentation on the part of the defenders are not entitled to damages in respect thereof.

35. The pursuers averments on record not having been proved the defenders are entitled to decree of absolvitor.

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INTERLOCUTOR

36. Therefore, sustains the defenders' third plea-in-law; assoilzies the defenders from the crave of the writ; finds the pursuers liable to the defenders in the expenses of the action , allows an account thereof to be given in and remits the same when lodged to the auditor of court to tax and to report..

NOTE

37. The evidence in this case, together with submissions occupied five days with many areas of fact and law being investigated. I have decided the issue in favour of the defenders on each of the two crucial questions namely (i) whether Mr Yule made a negligent misrepresentation to the pursuers and which (ii) induced the pursuers to enter into the contracts. I have found (i) that Mr Yule did not make a negligent misrepresentation in that (a) he owed no duty of care to the pursuers, (b) what he said was not proved to be false and (c) what he said (orally or in writing) was not said negligently and (ii) that what Mr Yule said could not reasonably have been anticipated to and did not induce the pursuers to enter into the contracts.

The evidence

38. The pursuers led evidence from Mr Ian Hawthorne their Managing Director, Mr Sandy Duthie their Administration Manager with responsibility for book-keeping finance and contracts, Mrs Denise Muir their Media and Marketing Manager, Mr Neil Raynor their IT Manager, and Mr Greg Booth IT Manager for a company Printograph Limited in Aberdeen. . Mr Hawthorne, Mr Duthie and Mrs Muir were all involved in the decision to acquire the C351. The acquisition was a significant one involving payment of £60,000 over a period of five years. It was important to them that the printing machine would accurately represent the tartans which they sold and hired out, and it was also important to them that it was good value for money.

39. The defenders led evidence from Mr Colin Yule, a Director and Senior Manager of the company responsible for the day to day running of the business, Mr Scott Simpson, the defenders' Operations Director and Mr Gordon Shepherd, a Solutions Consultant for Konica Minolta

40. On the issue as to whether any and if so what representations were made by the defenders to the pursuers Mr Hawthorne, Mr Duthie, and Mrs Muir gave evidence for the pursuers and Mr Yule gave evidence for the defenders.

41. Mr Hawthorne could only speak to what was reported to him, and largely proceeded on the basis of what Mrs Muir and Mr Duthie told him. Mr Duthie accepted Mrs Muir's views on the question of print quality He attended the meeting in January 2006 at which Mr Yule submitted his written proposal and was able to form his own favourable view of the defenders proposal in respect of the other matters it contained. He did not recollect seeing the sample prints or Mrs Muir's prints at the meeting.

42. The critical two witnesses on the issue of what was said by Mr Yule in respect of quality were Mrs Muir and Mr Yule. There was not a great deal of difference between them on the words used by Mr Yule as is shown in the pleadings.

43. Mrs Muir, whilst explaining how crucial it was to her that the tartan products which she wished to represent on printed paper were accurately represented, gave evidence that she had relied purely on the statement by Mr Yule that the C351 would provide better quality prints and would be cheaper to run than the existing Canon machine. The pursuers were about to commit themselves to a contract which would cost them in the region of £60,000 over five years, and would have been able to make a comparison between their own prints from the Canon and those provided by Mr Yule from a C351. I would have expected, if print quality was of such critical importance to the decision to purchase the equipment, Mrs Muir, who was the person most responsible for making the decision as to quality of print, would satisfy herself as to that critical matter. She would have been able to do that by reference to the prints supplied by the defenders for that very purpose from the CD which she herself had prepared. Mrs Muir would also have been able to explain to Mr Yule precisely what her requirements were, and what standard the C351 had to meet. She did not do so. She said that she assumed Mr Yule knew the qualities of the Canon because he had sold it to the pursuers some years earlier. There was no evidence which would support this assumption in respect of the very particular requirements she had for printing tartans. In cross-examination she accepted that quality of print was a matter of subjective judgment. When asked if Mr Yule was expressing an opinion on the issue of print quality she replied "Yes, but one that I valued".

44. Mr Yule has been in the business of selling photocopying and printing for many years. In October 2005 he had set up in a new business with a colleague. His company had become main dealers for Konica Minolta. He understood his market and had been provided by Konica Minolta with detailed information, taken from the other manufacturers' own promotional product, as to the capabilities of the competition. They had provided him with a comparative assessment of various criteria which could be objectively assessed in respect of Konica Minolta machines and those of their competitors. He was able to compare the financial consequences of the defenders taking out a new contract for a C351 as opposed to staying with their Canon contract by virtue of information of the terms of the existing contract which had been provided to him for that purpose by Mrs Muir

45. He explained the need in his line of business for his customers to be able to trust him and the need for him to get his objective facts right. So far as the subjective assessment of print quality was concerned he indicated that this was always a matter for the customer if it was possible for comparisons to be made. In this case it was possible for the customer to make a comparison of print quality from the two sets of prints produced by the two machines from the disc provided for that purpose by the customer. He would express his personal opinion. The statements which he had made as to subjective matters such as print quality were made by him as a matter of his opinion.

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SUBMISSIONS

Pursuers Submissions

46. Mr McCallum for the pursuers submitted that the pursuers had suffered loss as a result of negligent misrepresentation by Mr Yule for which the defenders were responsible. He submitted that the statements made by Mr Yule had induced the pursuers to enter into both contracts and that Mr Yule and the defenders had owed a duty of care to the pursuers. The statements that had been made were false and a loss had been incurred. All the requirements of Hedley Byrne v Heller & Partners 1964 AC465 were made out.

47. He submitted that while a statement such as "the machines were the best on the market" if said in isolation might have amounted to "advertising puff" or verba jactantia when looked at along with all the other things which were said by Mr Yule it amounted to a representation. He referred to Gloag on Contract. The statement made by Mr Yule that the C351 would "far exceed the quality of their current Canon" was a statement of fact which had been relied upon by the pursuers. In production 4 there was a proposal, and a statement on page 4 "this process ensures all equipment is operational on day of delivery" was a statement of fact and was not accurate. He referred to McBryde on Contract, 2^nd Edition, page 375 and the case of Esso Petroleum v Mardon 1976 QB 801. He said the current case was on all fours with Esso Petroleum. In that case Esso induced Mardon to take the tenancy of a petrol filling station by negligently misrepresenting the estimated annual throughput of petrol sales. This was held to give a remedy in tort. According to the text of McBryde "a negligent statement which induced a contract produced a liability in damages". (This is repeated in the Third Edition at paragraph 15-74 on page 420.) Referring to Hedley Byrne he said that there was proximity between the parties and in this case the defenders had special knowledge which the pursuers had relied on. He referred to Spring v Guardian Assurance 1995 2AC 296. Mr Yule held himself out to be holding a special skill and special knowledge because he had worked for Concept dealing with Canon copiers, he had familiarised himself with Konica and had researched their product and he had made the representations.

48. In making these representations he had known that Mrs Muir would rely on them for the purpose of entering into the contracts. He therefore had a responsibility to see that they were accurate. At the end of the day the C351 was not capable of doing the job required of it, and this was entirely contrary to the representations which Mr Yule had made concerning it.

49. So far as loss was concerned he sought payment of lost staff time, invoices for out-sourcing printing work, the costs of employing Mr Booth, the hire of the replacement Canon, legal time, the overlap of the C351 and the Canon, extra "cliks", the underpayment of the Canon lease by Capture, legal expenses and wasted paper totalling £18,906, but restricted in terms of the crave to £16,493.

Defenders' submissions

50. Miss Greig for the defenders said that she was insisting on her second plea-in-law, namely that the pursuers' averments were irrelevant and lacking in specification. As the matter had proceeded through proof she was now seeking absolvitor rather than dismissal which the plea had originally sought. She submitted that the basis of the pursuers' case was not clear, and that the plea-in-law which they had makes no reference to an inducement to enter into a contract with a third party. She accepted that in line 323 of the record the pursuers in condescendence 5 set out three representations on which they say they relied in entering into the initial purchase and maintenance agreement with the pursuers, and the lease hire agreement with BNP. She submitted that the pursuers do not aver what the nature of the relationship between the parties was that gave rise to a duty of care. While the pursuers in lines 80 to 110 of the record aver certain representations, many which are admitted, they do not link them to the averments relating to the duty of care. She referred to the case of Clelland v Morton Fraser & Milligan WS 1997 SLT (Sh Ct) 57 and the important difference between bringing a case under Section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 and bringing it under the common law of delict. She referred to McBryde, Third Edition, at paragraph 15.75 and 76. The pursuers' claim was not set out on the basis of Section 10 and accordingly had to viewed as a delictual case. As a delictual case there was no evidence to support the necessary special relationship between the parties or the special skill or knowledge on the part of Mr Yule. She submitted that it had never been suggested to Mr Yule in cross-examination that he owed a duty, nor what the extent of that duty might have been. It had not been suggested that he had not taken reasonable care not to make false statements.

51. She submitted that the pursuers needed to prove four matters in respect of representation. (1) that the statements made were representations (2) that they were misrepresentations i.e. they were false (3) that the false representation were negligently made and (4) that the pursuers relied on the representations in entering the contract. So far as the statement that the Konica would "far exceed the quality of the Canon" Denise Muir did not remember that. As to the question whether it could be said that it was represented as a fact the answer was no. Could it be said to be without a basis again the answer was no. It could not be said that Mr Yule did not believe it when he said it and it was not the pursuers' case that he had not investigated the matter before making the statement.

52. So far as the statement contained in the proposal on page 4 that the equipment would be "fully operational on day one" that, if it was anything, was a term of the contract. In any event it was operational in that it worked and it produced prints which initially were acceptable. Even if it turned out that that statement was incorrect it was not negligently made.

53. So far as the issue of the quality of prints is concerned this was an honest expression of opinion. This was not a case where Mrs Muir had said ""this is the standard I want" and Mr Yule had said he could meet that. Rather it was Mr Yule saying "this is what I have - do you want it?" She referred to Hedley Byrne, Esso Petroleum, and Spring v GRE. The pursuers simply had not established their case. They had not established that Mr Yule possessed special skill or knowledge or skill. They had not established that a duty of care existed. So far as regards the pursuers saying Mr Yule held himself out to be an expert that was not correct. He simply offered himself as a man with a working knowledge of his business. Mrs Muir herself had said that she had "valued his opinion". She had said that "he knows the product". That was not as much as being an expert. He did not possess special skill or knowledge.

54. She pointed out that while Mr Yule had compiled the proposal to put to the pursuers he had not advised them. He was not acting in an independent capacity. The proposal made it clear that the defenders were principal dealers. He had produced prints from the disc that had been provided to him. He had done what he could to give the pursuers the information they needed to make an informed choice but the choice had been the pursuers and in particular Mrs Muir's. The pursuers say in their pleadings that Mr Yule "ought to have known" that his representations were false. The do not say how he ought to have known. She submitted that it could not be negligent representation if it was merely the case that the product failed to meet the pursuers' subjective expectations. She accepted that the pursuers didn't get what they wanted, and perhaps didn't get what they expected, but this did not give them a remedy. Whichever basis of the case, delict or Section 10, the evidence did not support that negligent misrepresentations were made and were relied on.

55. From the pursuers' perspective the issue was the quality of the prints, but the pursuers had not lodged the Canon prints that were produced by Mrs Muir and given to Mr Yule when he was putting together his proposal. The tartan swatches had not been lodged. The evidence simply was not before the court. There was no evidence that the C351 was incapable of providing better quality prints than the Canon.

56. At its very best the pursuers' evidence might support the view that the particular 351 installed at the pursuers' premises was unable to print a better quality print than the Canon in the eyes of the pursuers or Denise Muir. For the pursuers to succeed on negligent misrepresentation she would have to prove that the Konica C351 as a type of machine was incapable of providing better quality prints at all.

DECISION

57. I consider that Mr Yule's evidence that he always expressed his views on matters such as print quality as being his opinion and that he always sought to leave the final judgements on such subjective matters of quality to the customer is consistent with what one would expect in a contract where the quality of the final product was clearly a matter of personal judgment or taste

58. In addition it seems to me that it would be somewhat naive of a business purchaser of a printer when considering print quality to rely entirely on the assertions of a salesman who was the principal dealer for the product of a manufacturer who was in competition with the manufacturer of her existing equipment.

59. I am satisfied that before the meeting in January 2006 Mr Yule was provided with the disc taken from the pursuers' computer system, perhaps from Mrs Muir's laptop computer which was part of that system, together with a set of five prints which Mrs Muir had made from the disc. I am satisfied that he produced a set of five prints from the same disc on a C351 before the meeting, attached them to his proposal and gave the proposal and prints to Mrs Muir before or at the meeting. It would have been extraordinary if he had not done so. That was why Mrs Muir had given him the disc. In these circumstances for her to say that in determining to acquire a C351 and in recommending the acquisition to her company she had relied on an expression of opinion from a salesman rather than on an assessment of the product of the machine which had been provided to her for that purpose is in my opinion incredible. I do not believe her. The five prints contained in production 22 are not the original set of five prints made by the Mr Yule on a C351 from Mrs Muir's disc. He gave the original set to the pursuers along with the proposal and they have not produced it. Nor have they produced the set of five prints which Mrs Muir produced from the disc before entering into the contract. The prints in production 22 were produced from the pursuers' disc by Mr Yule some time later on a different C351. Mrs Muir however could easily have made her own comparisons between the two original sets of prints in January 2006 and it would in my opinion have been unreasonable of her in the discharge of her duties to her employers not to do so.

60. In condescendence 5, line 325 of the record the pursuers' pleadings narrate three representations which they say Mr Yule made to them and which they relied upon, namely (1) that the C351 machine would provide better quality prints than the Canon, (2) that the C351 machine would be cheaper to run than the Canon and (3) that the C351 machine would be operational on the day of installation. The pursuers aver at line 333 that "Said representations were false. The said Colin Yule knew or ought to have known that they were false." There was no suggestion in the evidence that Mr Yule knew that they were false and indeed that would be consistent with a case based on fraudulent representation rather than negligent representation.

61. So far as the first of the three alleged misrepresentations is concerned, namely print quality, in line 335 - 339 of the record the pursuers aver that Mr Yule was familiar with the specification and capabilities of the original Canon machine, and that he knew or ought to have known that the Canon would produce prints which were of superior quality to the Konica machine. They say at line 341 that "Accordingly the said Colin Yule knew or ought to have known that the Konica machine in relation to which the defenders were Konica Minolta agents was incapable of producing the same quality of copy as the existing Canon machine." The averment that Mr Yule knew that what he was saying was false was unsupported by evidence and again is quite an inappropriate averment for a case based on negligence. At line 346 the pursues set out Mr Yule's duty to take reasonable care not to make false statements to the pursuers and in particular not to make representations to the effect that the Konica C351 Bizhub machine could produce better qualities than the Canon which he knew or ought to have known to be false.

62. So far as the second alleged misrepresentation is concerned, namely that the C351 would be cheaper to run, the pursuers do not say in what way this was false. They do not say for example that the C351 was more expensive to run, far less in what way or by how much. The evidence from Mr Hawthorne, Mr Duthie and Mr Yule was all to the effect that the C351 contract worked out cheaper. I consider that this was a statement of fact which Mr Yule made intending and expecting it to be relied on at the time he made it and that it amounted to a "representation". It was repeated in the proposal when the arithmetic justifying it was set out for the pursuers to consider. But on the evidence it was not a misrepresentation. It was not false.

63. So far as the third alleged misrepresentation is concerned, namely that the machine would be operational on the day of installation, the only way in which it was said not to be operational on that day was in respect of the quality of the prints. There was no other complaint under this head. I do not consider that the word operational covers issues of quality. It means in this context "working" or "ready to work". It refers to the procedures of the machine, to it working or being capable of working as it was intended to. Such a machine would be "operational" even though its output was inferior in quality to that of a different machine. There was no suggestion far less evidence that there was something wrong in the way the machine worked and accordingly this leg of the pursuers' case fails I agree with Miss Greig's submission that in any event this was not a "representation". If anything it would have been a condition of contract

64. At the end of the day therefore the only issue raised by the pursuers in this case as a negligent breach of duty is the alleged representation as to quality of print.

65. A negligent misrepresentation can be actionable depending on the circumstances both in terms of section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 and at common law.

66. For section 10 to apply one party to a contract has to have been induced to enter into it by negligent misrepresentation by another party to the contract. There is no need for any special relationship or special knowledge or skill on the part of the party making the misrepresentation. It is both necessary and sufficient that both are parties to the contract. Mr McCallum at the Case Management Conference stage of the case took great care in setting out the legal basis of his case in his pleadings. He does not mention Section 10 in the pleadings nor did he refer to it in his submissions. He relied on the common Law and in particular Esso v Marsden with which he said this case was on all fours. The defenders did not rely on the terms of condition (iii) of the contract between the pursuers and defenders

67. The modern law of delictual liability through negligent misrepresentation is founded on the case of Headley Byrne & Co Ltd v Heller & Partners Ltd where the House of Lords held that a liability for damages in tort for economic loss could arise through a negligent misrepresentation where a duty of care arises from a special relationship. In discussing what constituted a special relationship Lord Reid said at page 486 that there was :-

."....no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him"

At page 483 he had said:-

"Where there is a contract there is no difficulty as between the contracting parties; the question is whether there is a warranty"

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68. At page 502 Lord Morris of Borth-y-Gest said :-

"I consider ... that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill a duty of care will arise"

69. In McInery v Lloyds Bank Ltd [1974] 246 at 253 Lord Denning M.R said:-

"...if one person, by a negligent misrepresentation, induces another to enter into a contract- with himself or with a third party-he may be liable in damages."

70. I do not think that there is much if any doubt that Hedley Byrne is as much a part of law of Scotland as it is of the law of England. It was specifically recognised by Lord Dunpark in John Kenway Ltd v Orcantic Ltd 1980 SLT 46. I am not aware of any decision of the Inner House to the contrary.

71. Esso Petroleum v Mardon is however a different matter. In it Lord Denning M.R. refused to accept the proposition that when negotiations between the two parties resulted in a contract between them their rights and duties were governed by the law of contract and not of tort, and their was no place in their relationship for Headley Byrne He said at page 820:-

"It seems to me that Headley Byrne & Co Ltd......properly understood, covers this particular proposition: 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"

In deciding as they did the Court of Appeal did not follow the majority decision of the Privy Council in Mutual Life v Evatt 1964 AC 465 that the duty of care established by Hedley Byrne was limited to persons carrying on or professing to carry on the business or profession of giving advice. Esso Petroleum was decided against the background of the passing of the Misrepresentation Act of 1967 which provided a remedy of damages where one party to a contract was induced to enter into it by negligent misrepresentation, but which was not retrospective. There was therefore a lacuna between the decision in Hedley Byrne and the passing of the Act which the Court of Appeal filled by setting out the way in which Hedley Byrne should be understood in cases where the negligent misrepresentation results in a contract between the parties to the misrepresentation.. As Ormrod L.J.said at page 827:- "In fact since this Act was passed there may be virtually no room for an action in negligence in those cases."

72. Whether Esso Petroleum v Mardon ever accurately reflected the law of Scotland is less certain. In John Kenway Ltd Lord Dunpark considered it did. He said "I have no doubt that the principle stated by Lord Denning is now incorporated in Scots Law as an example of culpa". In Foster v Craigmillar Laundry 1980 SLT (ShCt) 100 Sheriff Nicholson, as he then was, did not. He considered himself bound by the decision of the Inner House in Manners v Whitehead (1898) 1 F 171 (which does not appear to have been cited to Lord Dunpark) to the effect that damages were not recoverable for misrepresentation unless fraudulent. In the unequivocal words of Lord McLaren at page 177 "The remedy of damages ....... Is confined to the case of fraudulent misrepresentation". Then section 10 of the Miscellaneous Provisions Act 1985 provided a remedy in damages for negligent misrepresentation where a contract between the parties to the representation resulted. This Act was retrospective. Since its passing there has been no need to resolve the argument about the applicability of Esso Petroleum. Section 10 provides the remedy without the need for any special relationship knowledge or skill However as Mr McCallum has argued this aspect of the case on the basis of the common law I would say that I respectfully follow Sheriff Nicholson's view that the case of Manners is a binding authority so far as the common law is concerned.

73. The pursuers' claim for damages in respect of their contract with the defenders so far as based on the common law must fail. Even if it had been pled as a statutory case in my opinion it would have failed for the reasons, other than special relationship, which I give in respect of the claim so far as it is relates to the pursuers' contract with a third party namely BNP.

74. However Esso Petroleum does have a role to play in negligent misrepresentation in Scotland. Lord Denning at page 820 (see paragraph 71 above) clarified what constituted a misrepresentation for the purposes of Hedley Byrne. A misrepresentation can be advice, information or opinion. It is also clear from the passage in Esso quoted above that Lord Reid's apparent restriction of special relationships to situations where the party misled sought the advice is removed. The modern position is, in my opinion, and reading the two cases together, that a duty of care arises where (1) "a man who has or professes to have special knowledge or skill makes a representation thereof to another - whether advice information or opinion - with the intention of inducing him to enter into a contract [with a third party] (per Lord Denning in Esso,) and (2) "it was plain that the party [receiving] the advice was trusting him to exercise such a degree of care as the circumstances required, where it was reasonable for him [ie the party receiving the advice] to do that, and where the other gave the information or advice when he knew or ought to have known that [the party receiving it] was relying on him" (per Lord Reid and the other four judges in Hedley Byrne.)

75. So while, since the passing of the 1985 Act in Scotland, and in of England the Misrepresentation Act 1967, with their less onerous requirements, Esso v Mardon will rarely if ever need to be relied upon in cases resulting in a contract between the parties to the misrepresentation, it remains relevant for the purposes of defining what type of activity can amount to a representation and whether a duty of care exists in cases not covered by the Acts

76. As I have said above I accept Mr Yule's evidence that what he said about the print quality of a C351 was, and was said to be, his opinion. It was an honestly held opinion based on his subjective judgment of the colours produced by both machines. It was not a representation of fact. Nonetheless as an opinion it could amount to a representation (and therefore a misrepresentation) giving rise to a liability in damages if a duty of care existed and the opinion was negligently and erroneously given.

77. I do not consider that Mr Yule was under a duty of care because I do not accept that he either had or professed to have special skill or knowledge on the issue in question, namely the respective quality of prints of tartans from the two machines. He would know what types of prints each produced, but that was not a special knowledge. Anyone could assess that by looking at the prints of each. He certainly could be expected to have a good working knowledge of the capabilities of the C351 but he was not and did not hold himself out to be an expert. That is what is required (see Sheriff Nicholson in Foster at page 103) He certainly did not have special knowledge of the capabilities of the Canon or of the printing of representations of tartans. If anyone had special knowledge of these matters for the purposes of producing prints of tartans for promotional purposes it would be Mrs Muir. That was her business.

78. Nor do I consider that in making the statement which he did Mr Yule knew or ought to have known that Mrs Muir trusted him to exercise any particular degree of care, nor indeed that it would have been reasonable for her to do that.. There was no evidence that he did know or that he ought to have known. It was not for example suggested that she told him. When he first gave his opinion he was a salesman trying to get the opportunity to put a proposal to a customer. He was not trying to get a contract signed there and then. He wanted to get his foot in the door. When he next gave his opinion he did so in the context of a meeting with two of his customers managers at which he submitted a written proposal containing two sets of comparative prints for the customers to consider with a view to making up their own minds. In those circumstances I do not consider that on either occasion he knew or ought to have known that his customers were trusting him to exercise a duty of care in expressing his opinion, nor that they would rely on what he said rather than on their own judgment of the quality of the two sets of prints and the proposal as a whole. I do not consider that on either occasion on which Mr Yule expressed an opinion it was objectively reasonable for either Mrs Muir or Mr Duthie, or both of them to expect him to exercise a duty of care. They were engaged in an arms length business negotiation and they had all the information they needed to make their own decision. All that they could reasonably expect in the circumstances was that any opinion Mr Yule expressed would be his honestly held opinion.

79. In addition in my opinion what Mr Yule said on print quality could not reasonably be expected to and did not in fact induce the pursuers to enter into any contract. Mr Hawthorne seems to me to be far too experienced a businessman to base a business decision of this not insignificant kind on the unsolicited statement of a salesman, standing the importance of high quality print reproduction to his company's business. He said "quality was foremost." Notwithstanding this his he did not see nor ask to see any examples of the C351's print quality in respect of the tartans which formed the core of his company's business. He said he relied on what he understood the representation of the salesman to Mrs Muir to be, namely that the cost of printing leaflets would be less and the quality of prints would be superior. He "felt safe" because the salesman was from his old supplier. He said "it was all being done because we were told [my emphasis] the quality of print would be better or as good as [the Canon]." He also relied on the fact that Mrs Muir's recommendation was endorsed by Mr Sandy Duthie who had "total control" of the financial side". I could readily accept that Mr Hawthorne would accept the joint recommendation of his marketing and finance managers, perhaps even without further inquiry on the basis that he could trust them to satisfy themselves on matters which were important to the company. I do not however accept that he would accept that advice without question when told that so far as quality of print was concerned Mrs Muir was proceeding only on the word of a salesman. That however is effectively what he said he did. I do not accept it.

80. Mr Duthie had the opportunity to study and compare the prints which were attached to Mr Yule's proposal but he did not look at them. He said he decided to go ahead with the contract because of what Mrs Muir said about print quality, because Mr Yule said the print quality of the C351 was the same or better than the Canon and because the proposed cost of the C351 deal made good business sense.

81. Mrs Muir provided Mr Yule with a CD (production 21) containing 5 images yet only remembers seeing two prints. She did not suggest she asked to see the other three or even enquired as to why they had not been produced to her. I much prefer Mr Yule's evidence that he produced prints of the five images on the disc that had been given to him for that purpose and that they were attached to his proposal. Having been given the opportunity to put forward a proposal and given the disc for that purpose it is difficult to see what else he would do. The prints were available to Mr Hawthorne and Mr Duthie if they chose to use them to assist them in making their decision as to whether or not to lease a C351. They were also available to Mrs Muir as providing the defenders' response to the test she had given them when she provided Mr Yule with the CD. I do not believe her when she says that she made her decision on print quality, which was her paramount requirement of a printer, and which was a decision which she knew would be relied on at least to an extent by her superiors, on the basis of an unsolicited opinion from a salesman that the C351 would, in the words of the pursuers pleadings (line 327), "provide better quality prints than the Canon."

82. I do not accept that the pursuers' decision was made in reliance on Mr Yule's opinion as to quality of print. In my opinion the decision was made on the basis of the comparison Mrs Muir was able to make between the prints produced by the two printers, a comparison each of the other two managers could have made if they had chosen to do so, and on the basis of the proposal.

83. Even if I am wrong in that and Mrs Muir never looked at the defenders prints, or having looked at them never relied on the comparison but rather on what Mr Yule said, I do not consider that it would have been reasonably foreseeable to a salesman such as Mr Yule negotiating a commercial contract in all the circumstances I have set out, that his business customers would rely on what he said to the extent of being induced by it to enter into the contract rather than by the samples of the C351 prints which were available to them. If they chose not to make that comparison that was their own choice.

84. It also seems to me that the pursuers do not differentiate between representations as to print quality of Konicas in general, and the warranties or conditions that might in some cases be given in respect of the sale or hire of a particular machine. For the pursuers to succeed in establishing that what Mr Yule had said on this matter was a misrepresentation, in other words was false, they would require to aver and prove that at the time or times Mr Yule expressed his opinion Konica Minolta C351 Bizhub machines as a type of machine did not as a matter of fact produce prints of a better quality than the specific Canon used by the pursuers. They would require to establish as a datum point the standard of quality of the prints that their Canon produced in or about November 2005 and/or early January 2006. Then they would require to aver and prove on a balance of probabilities that at those times the C351 as a type of printer did not match or beat the standard of the Canon in some objective ways. It would not be sufficient that the C351 which was subsequently delivered produced inferior prints to the Canon, or that a replacement C351 produced inferior prints, or that another C351 in the manufacturers showroom produced inferior prints or that it was the opinion of an employee of the manufacturer that the C351 was not appropriate for work of a particular kind. All of those matters might well provide evidence, perhaps strong evidence, to support the pursuers' case, but the nub of that case remains whether the C351 as a type of machine produced prints which would be judged objectively to be of inferior quality to the existing Canon in November 2005 to early January 2006.

85. On the issue of the quality of print produced by the C351 delivered by the defenders to the pursuers Mr Hawthorne, Mr Duthie and Mrs Muir gave evidence as did their IT Manager, Mr Neil Raynor, and Mr Greg Booth, the IT Manager of a specialist digital printing company in Aberdeen. Each of the employees of McCalls, to a greater or lesser extent, considered that the quality of print from the C351 which was delivered, and the replacement C351, was inferior to the quality which had been provided by their old Canon. The most critical was Mrs Muir for whose department the quality of print was most important. She considered that the colours on the 351 were "completely out" that the "quality was not good", that the copy "looked nothing like it" [i.e. the tartan].. She said that engineers from Capture Imaging spent hours but the problem was not resolved.. It was then replaced by the C352 which after some tweaking produced acceptable prints. I do not consider evidence relating to the C352 has any bearing whatsoever on the accuracy of what Mr Yule said some months earlier about the C351. In March or April they had been able to rent back their original Canon, and it was as good as it had been before. She did not consider that the problem was with her PC as the Canon printed properly from that. Mr Raynor, the pursuers' IT manager, did not consider that the quality of the prints from the C351, which in his opinion was poor, was down to either the pursuers network or Mrs Muir's laptop

86. Mr Greg Booth was instructed by McCalls some time prior to June 2006. He carried out some tests both at the pursuers' premises and at the Konica facility in Livingstone and prepared a report (No. 8 of the joint bundle of documents). He printed out high resolution images both on the Canon, which was in McCalls' premises, and with the C351. He found that Canon prints appeared to him acceptable whilst the Konica printed a reduced tonal range with colours that were overly vivid. The colours were over-saturated, the highlights were too bright and the shadows were too dark and the range of colour levels was very poor. This result was achieved both using imaging software in Windows XP and printing from high quality PDF files. Mr Booth visited Konica Minolta's print suite in Livingston. He took a number of high quality PDF files and tested them on a variety of Konica Minolta printers. All prints were acceptable apart from the C351. This had a poor tonal range with overly vibrant colours. It reflected the quality that was achieved printing the same document on the C351 at McCalls. By contrast prints sent to the other, laser-based Konica Minolta printers gave a good tonal range and accurate colour. He did not consider that any of the printing problems arose as a result of computer network problems within McCalls.

87. Mr Yule, his colleague Mr Simpson, and to an extent Mr Shepherd of Konica Minolta all expressed opinions, in different degrees, to the effect that the prints on the C351 or one of them were not so bad and reflected what was on the computer.

88. None of that evidence however could be properly tested. I have set out in paragraph 27 what prints were available to the court and at paragraph 26 what prints were not available. No tartans were lodged and no prints were lodged which showed what the two machines produced in November 05 to January 2006. The witnesses could therefore not explain and be cross-examined on their opinions by reference to what the machines had actually produced. In the absence of the prints from both machines at the time and the tartans I cannot rely on the subjective evidence sufficiently to extrapolate that the C351 as a type of machine would produce sub-standard prints.

89. Mr Booth also gave evidence of a comment by an unidentified member of the Konica Minolta staff to the effect that the Bizhub C351, not being a laser printer, but rather an LED printer, was not appropriate for the task. Whilst such hearsay evidence is of course competent I am not be prepared to place much weight on it on such an important point particularly when no information as to the identity and experience of this person was led. I would expect evidence of that kind to come from a primary witness who could be cross-examined on his opinion.

90. Accordingly whilst the pursuers and Mrs Muir in particular were genuinely unhappy about the quality of the prints they obtained from the C351, and whilst the evidence of the pursuers witnesses certainly raises a suspicion that the Konica Bizhub C351 as a type of machine produced a print of tartans of inferior quality to the Canon, the evidence does not reach the necessary standard of proof namely a balance of probabilities.

91. Had I found in favour of the pursuers on the merits, I would have assessed damages at £8910.92, calculated as follows. I would have allowed the additional costs of outsourcing work in January to March 2006 being £4878.47 (production 6). I would have allowed the cost of Mr Booth's involvement which appeared to me to be principally for the purpose of dealing with the print problem rather than for the purposes of the litigation. This amounts to £700 (production 9). I would have allowed £900 for the rehire of the Canon which related to a period when the pursuers had one or other of the C351s, although not invoiced until later, (production 11). In terms of the joint minute I would have allowed the two sums of £32.45 for paper and £1400 in respect of costs of settlement of the leasing agreement for the Canon

92. I would not have allowed the staff costs as claimed. (spreadsheet production 17) These were claimed on the basis of approximately 150 hours divided among Mr Duthie Mrs Muir and Mr Raynor at an average of £15 per hour. There was no vouching for this, no timesheets were produced. No evidence of salary rates for the three, or how the time spent was allocated among them.. However I have no doubt that a considerable amount of time would have been spent on the problem which would have been better spent on the pursuers' normal business and that their business had been disrupted. I would have made a lump sum award of £1000 to cover this disruption.

93. I would not have awarded anything in respect of outsourcing work when the C352 was not being used. After installation this machine soon became acceptable to Mrs Muir, but its use was discontinued. According to the pursuers pleadings(lines 211 - 214), which are admitted (lines 281 - 283), it replaced the second C351 about 31^st May 2006 There was no good reason for the pursuers not to avail themselves of this machine which had been provided to them by the defenders. I was told it was on legal advice, but that advice was not satisfactorily explained.

94. I would not have awarded anything in respect of the pursuers' solicitors' invoice. It was not explained precisely what this was for although clearly from its terms it had something to do with a dispute with BNP. It may be that it could have formed part of the pursuers' claim for expenses if they had succeeded in the litigation.

95. As the defenders have succeeded in all aspects of this matter I have found them entitled to their expenses.

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