Supreme Court Decision: Assumption Of Responsibility

In Steel and another (Appellants) v NRAM Limited (Respondent (Scotland) [2018] UKSC 13, the Supreme Court confirmed that, in order to prove an assumption of responsibility by a professional for a careless misrepresentation, reasonableness is a key factor. The representee must show that it was reasonable for it to rely on the representation and that the representor should reasonably have foreseen that the statement would be relied on.

The facts

The appellant solicitor acted for a company called HCL which, in 2002, purchased a business park using funds borrowed from the respondent, a commercial lender. The loan was secured over 4 commercial units in the business park.

In 2005, HCL sold one of the units. The respondent consented to the release of that unit from its security in return for partial redemption of the loan.

In 2007, HCL was selling a second unit. The respondent had confirmed that it would release that unit from its security in return for repayment of £495,000, with the balance of the loan being secured over the remaining 2 units. The appellant acted for HCL on both sales.

On the eve of the sale, the appellant emailed the respondent and asked for discharges to be signed and returned as soon as possible "as the whole loan is being paid off for the estate and I have a settlement figure for that". It was later accepted that this statement was completely inaccurate.

The respondent did not query the terms of the appellant's email and provided the discharges, which meant that it no longer had security over any of the units. It did not check the accuracy of the appellant's statement against its own file.

HCL continued to make loan repayments until 2010, when it became insolvent. At that stage, the respondent realised that its outstanding debt was unsecured.

The respondent raised proceedings against the appellant, alleging careless misrepresentation.

The judge at first instance held that it was not reasonable for a bank in the position of the respondent to rely solely upon a statement from the borrower's solicitor, without first checking its records. He also held that the appellant could not reasonably foresee that the respondent would rely on her statement without first checking it.

The Inner House (the Scottish court of appeal) held that the appellant had, in the circumstances, assumed responsibility for her representation to the respondent, and that the court did not have to consider whether the respondent had acted reasonably in relying...