Nram Plc Against Jane Steel And Bell & Scott Llp
| Jurisdiction | Scotland |
| Judge | Lord Doherty |
| Neutral Citation | [2014] CSOH 172 |
| Court | Court of Session |
| Published date | 05 December 2014 |
| Year | 2014 |
| Date | 05 December 2014 |
| Docket Number | CA7/13 |
OUTER HOUSE, COURT OF SESSION
[2014] CSOH 172
CA7/13
OPINION OF LORD DOHERTY
In the cause
NRAM PLC
Pursuers;
against
JANE STEEL
First Defender;
and
BELL & SCOTT LLP
Second Defenders:
Pursuers: Clancy QC, Hawkes; TLT LLP, Solicitors
Defenders: Duncan QC, Paterson; CMS Cameron McKenna
5 December 2014
Introduction
[1] The pursuers were formerly incorporated under the name Northern Rock (Asset Management) plc. At all material times their business included commercial lending. The first defender is a solicitor. Until 1 September 2006 she was a partner in Clairmonts, Solicitors. On that date Clairmonts was taken over by the second defenders and she became a partner in the second defenders. She continued to be a partner of the second defenders until November 2009 when she left to become a partner in another firm.
[2] The pursuers seek to recover damages from the defenders in respect of loss and damage which they claim to have suffered as a result of reliance by them on statements made by the first defender in an email to them of 22 March 2007, during the course of a transaction where she acted for a client, Headway Caledonian Limited (“HCL”). I heard a proof before answer on 11, 12, 16 and 17 September 2014.
The pleadings
[3] The pursuers’ primary case is that the first defender owed them a duty to take reasonable care that the statements which she made in the email were accurate. They were inaccurate, and they were negligent misstatements upon which the pursuers had reasonably relied. As a result the pursuers had been misled into discharging a security over three properties owned by HCL when in fact only one property ought to have been released from the security.
[4] The pursuers’ secondary case is that in the circumstances it was the first defender’s duty to take reasonable care not to release the discharges for registration until she had received funds sufficient to redeem HCL’s outstanding loan with the pursuers. In releasing the discharges for registration she had breached that duty, causing the pursuers loss and damage. The factual foundation for this secondary case is set out in condescendence 5 and 8:
“5. …Due to the formalities of settling Scottish conveyancing transactions (the purchase price will only generally be released, in exchange for inter alia a discharge of the security over the sale subjects), executed Discharges were as a matter of course provided to the borrower’s solicitors in advance of funds being made available to NR. It was therefore necessary for NR to rely exclusively on the borrower’s solicitor where direct requests were made, such as here, for discharge documentation. This was the process which NR followed for the partial discharge of Unit 3. By way of further example, the same solicitor had in November 2005 requested the execution of a full discharge (drafted by her firm) of a security over other subjects owned by HCL (Macdonald Drive, Lossiemouth). This was provided to her in advance of funds being received for the redemption of the loan. Ms Steel was accordingly well aware that any request by her for discharge documentation from NR would generally be acted upon by them without question. She was also aware that it would be provided to her, and could be passed to the purchaser, in advance of redemption funds being transferred. This was on the implicit understanding that such funds would then be held by her to the strict order of NR and, in the absence of any contrary instruction, should be remitted to them forthwith…
8. … The members of the pursuers’ CMT team who received the email…, the members of the pursuers’ Admin Team who were responsible for having the discharges executed and the signing officer who executed both discharges were misled into believing that the first defender would repay or arrange repayment of the whole borrowings on receipt by her of the executed discharges. They were misled into believing that the first defender would not deliver the discharges to the purchaser of unit 1 or would not otherwise cause or permit the discharges to be registered without effecting or arranging repayment of the whole borrowings. If they had not been misled in this way they would not have arranged for the discharges to be executed or returned to the first defender … NR are content to execute the discharge documents in advance of funds being received by them only because they rely on the requesting solicitor not releasing those documents without receiving in exchange a sum sufficient to redeem the outstanding loan and thereafter to hold those funds to NR’s order. The first defender knew that this was a common practice in transactions where a solicitor acts for a party selling heritable property in Scotland which is burdened by security. She knew that the pursuers were relying on her not to release the discharges or otherwise cause or permit their registration unless or until they were repaid in full …”
[5] The defenders deny that the first defender owed a duty of care the pursuers. They deny that the pursuers sustained the loss and damage they claim to have as a result of either of the suggested failings. They also have pleas of volenti non fit injuria, sole fault, and contributory negligence.
The evidence
[6] The pursuers led evidence from three of their employees - Martin Clarke, Christine Stephenson and Ross Johnston. The only witness called by the defenders was the first defender. Signed witness statements had been lodged in advance of the proof and these were treated as the witnesses’ evidence-in-chief. A joint bundle (“JB”) of productions was prepared. There were two joint minutes of admissions (6/69 and 6/70 of process). In terms of 6/70 it was agreed that the witness statement of John Lindsay, and the witness statements of Kenneth Pattullo, were, in respect of each witness, “to be treated as his evidence in the cause.” Hamish Munro was on the defenders’ list of witnesses and a witness statement from him had been lodged, but neither party called him as a witness. Part of Mr Munro’s witness statement was put to the first defender in cross-examination. There was no agreement that the statement should be treated as Mr Munro’s evidence in the case, but the pursuers placed some reliance on it. In terms of 6/69 a variety of facts were agreed. Other matters were the subject of admissions made on record. In the result there was only very limited controversy as to the facts. In those circumstances I propose first to set out those parts of the evidence which were clearly uncontentious before turning to look at other matters.
Uncontentious evidence
[7] By 2006 the first defender had acted for many years as a solicitor for Hamish Munro and for companies in which he held an interest, including HCL.
[8] In 1997 HCL purchased Cadzow Business Park, Hamilton. It held the property under two separate titles registered in the Land Register: LAN6421 and LAN124573. The pursuers advanced HCL part of the purchase price. HCL granted the pursuers an “all sums” standard security over the property held under those two titles. The property comprised four units (Units 1, 2, 3 and 4). The standard security was registered in the Land Register on 15 September 1998. On 27 June 2002 HCL granted the pursuers a floating charge over all of its assets.
[9] In May 2005 HCL sold Unit 3. The pursuers agreed to release the unit from the standard security in return for a partial redemption payment of £468,588.95 being made. The first defender acted as HCL’s solicitor in relation to the conveyancing aspects of the sale and the release of the unit from the security. She wrote to the pursuers on 26 May 2005 enclosing two Deeds of Restriction in appropriate terms to restrict the pursuers’ security to Units 1, 2 and 4. The pursuers executed the Deeds on 20 June 2005 and returned them to the first defender. While initially the intention had been for settlement to take place on 27 May 2005 in fact the transaction did not settle until a month later. On 29 June 2005 the first defender made the capital repayment of £468,588.95 to the pursuers on behalf of HCL.
[10] In November 2005 HCL sold a property it owned at Macdonald Drive, Lossiemouth. The pursuers had a standard security over that property. Once again the first defender acted as HCL’s solicitor in relation to the conveyancing for the sale and for the release of the property from the security. She sent the pursuers a draft discharge of the security. On 9 November 2005 she made a capital repayment of £199,883.15 to the pursuers on behalf of HCL. The pursuers sent an executed discharge to the first defender on 16 December 2005.
[11] In May 2006 HCL entered into heads of terms for the sale of Unit 1 to Fred Berman Properties Limited (“FBPL”). On 23 May 2006 the first defender was instructed by HCL to act on its behalf in relation to the proposed sale. The pursuers, including Mr Clarke, had been informed by HCL in September 2006 of the proposed sale of Unit 1 at a price of £560,000. HCL requested the release of Unit 1 from the pursuers’ standard security. Mr Clarke authorised the instruction of DM Hall, Chartered Surveyors to provide a valuation of the property which would remain as security subjects - Units 2 and 4. On 11 September 2006 DM Hall reported that the total value of the two units was £1,425,000. On 12 September 2006 the commercial finance manager at the pursuers’ Edinburgh office, John Lindsay, sent a memo to Martin Clarke, the Lending Manager at the pursuers’ Head Office at Doxford, Sunderland. Mr Lindsay recommended that a capital repayment of £495,000 be required in return for the release of Unit 1 from the standard security. The following day a Partial Redemption Pro Forma for that capital repayment in relation to the proposed sale of Unit 1 was prepared by a case manager in the pursuers’ lending team and was approved and signed by Martin Clarke. It showed that the loan balance after the £495,000 repayment would be £726,850....
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Nram Plc Against Jane Steel And Bell & Scott Llp
...for a proof before answer on 11, 12, 16 and 17 September 2014. On 5 December 2014, the Lord Ordinary granted decree of absolvitor ([2014] CSOH 172). The pursuers reclaimed. Cases referred to: Al-Kandari v JR Brown & CoELR [1988] QB 665; [1988] 2 WLR 671; [1988] 1 All ER 833; [1988] Fam Law ......