In the recent decision of Steel and another v NRAM Limited (formerly NRAM Plc) (Scotland), a solicitor acting for Headway Caledonian (Headway), Ms Steel, carelessly misdescribed a proposed conveyancing transaction to the opposite party, NRAM Ltd (Northern Rock).
Northern Rock was acting without a solicitor, relied on Ms Steel’s misdescription, and lost money. Was Northern Rock able to recover its loss from the solicitor on the basis that she had breached a duty of care owed to it?
In 2007 Ms Steel sent an email to Northern Rock by which, inexplicably and entirely inaccurately, she requested that Northern Rock release all of the security it held over Headway’s property in circumstances where the parties had agreed only to a partial release of security in exchange for a partial repayment of a loan. Northern Rock did not query Ms Steel’s request and proceeded to release all of its security (in exchange for partial repayment).
This error went unnoticed and, in 2010, Headway went into liquidation. Only at this stage did Northern Rock realise that it no longer held security for the outstanding loan balance (the remainder of Headland’s property having, by this time, been sold). Northern Rock claimed against Ms Steel and her firm for its loss suffered as a result of its reliance on her email.
Northern Rock’s claim failed. The Supreme Court unanimously held that the authorities “demonstrate in particular that the solicitor will not assume responsibility towards the opposite party unless it was reasonable for the latter to have relied on what the solicitor said and unless the solicitor should reasonably have foreseen that he would do so. These are, as I have shown, two ingredients of the general liability in tort for negligent misrepresentation; but they are particularly relevant to a claim against a solicitor by the opposite party because the latter’s reliance in that situation is presumptively inappropriate” (per Lord Wilson).
There was nothing in the case law supporting a conclusion that it is not always necessary for a representee to show that it was reasonable for it to have relied on the relevant representation. Further, a commercial lender (in this case Northern Rock) implementing an agreement concerning its security does not act reasonably by proceeding upon no more than a description of the agreement’s terms as advanced by the borrower or his solicitor.