A Reappraisal of Solicitors’ Liabilities to Opposing Parties and the (Further) Retreat from Caparo – Steel and Another v NRAM Ltd
| DOI | 10.3366/elr.2019.0553 |
| Published date | 01 May 2019 |
| Pages | 247-253 |
| Author | |
| Date | 01 May 2019 |
A makes a careless representation which causes economic loss to B. There was no contract between them. But did A owe a duty of care to B? No, said the trial judge. Yes, said the appellate court. So it is A who brings this further appeal.
Lord Wilson's summary encapsulates the issues at the heart of
Jane Steel, formerly partner in Bell & Scott LLP, acted for a company called Headway Caledonian Ltd (“HCL”). HCL had purchased the Cadzow Business Park with the assistance of a loan from Northern Rock. Northern Rock was granted a standard security over all four units of the business park. In 2005, HCL sold Unit three. Steel successfully negotiated with Northern Rock, who did not have legal counsel, to have Unit three removed from the standard security in exchange for £470,000. Units one, two and four remained on the standard security. A similar transaction occurred months later on a different property, again with Steel negotiating directly with Northern Rock.
In 2006, HCL sought to sell Unit one and Steel again negotiated with Northern Rock regarding the release of this unit from the standard security in exchange for a remittance of £495,000. Northern Rock insisted that the standard security remained on Units two and four. This was agreed, and Steel was instructed to make the remittance to Northern Rock once the sale was completed.
Steel sent an email requesting the signed forms for the removal of Unit one's security. However, she added that “the whole loan is being paid off for the estate and I have a settlement figure for that”. This statement went beyond her instructions from HCL and she had never been provided with a settlement figure. She had also attached discharge forms for the entire standard security over all three units. Northern Rock did not properly check this representation against their own files and signed and returned the discharge forms. HCL continued to make interest payments to Northern Rock on the outstanding loan until they went into liquidation in 2010. Northern Rock, by now “NRAM”, only then discovered that the entire standard security had been discharged during the sale of Unit one. With little prospect of recovering the debt from HCL, they sued Steel, and her firm, for Steel's negligent misrepresentation.
The case was dismissed at first instance.
Lord Doherty had to determine which tests applied when attempting to establish whether a duty of care existed between the parties. He cited
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