Steel & Anor v. NRAM Ltd (formerly NRAM Plc) (Scotland)

Smart Summary

Supreme Court of the United Kingdom – Anonymous Case Summary

Factual and Procedural Background

The Plaintiff Lender held a floating charge and an “all-sums” standard security over three commercial units owned by Company A. In March 2007 the Defendant Solicitor, acting for Company A, emailed the Plaintiff Lender and (carelessly) stated that the “whole loan” was being repaid and enclosed draft discharges of the security. Relying on that email, the Plaintiff Lender executed and returned deeds discharging its security over the remaining two units. Only £495,000—not the full loan—was repaid. When Company A later became insolvent, the Plaintiff Lender’s remaining debt (approximately £370,000) was unsecured and irrecoverable.

The Plaintiff Lender sued the Defendant Solicitor and the Defendant Law Firm in the Outer House of the Court of Session. Judge Doherty (the Lord Ordinary) dismissed the claim, holding that no duty of care was owed. The Inner House (Judges Smith and Clark, with Judge Brodie dissenting) reversed that decision and entered judgment for the Plaintiff Lender. The Defendants appealed to the Supreme Court, which delivered the present judgment.

Legal Issues Presented

Whether a solicitor acting exclusively for one party (Company A) in a commercial transaction owed a duty of care in tort to the opposite party (the Plaintiff Lender) in respect of a careless misrepresentation made during that transaction.
Whether it was reasonable for the Plaintiff Lender to rely on the Defendant Solicitor’s email without checking its own records, and whether such reliance could give rise to an assumption of responsibility sufficient to create a duty of care.

Arguments of the Parties

Appellants’ (Defendants’) Arguments

No duty of care was owed because a solicitor normally owes duties only to the client, not to the opposite party.
An assumption of responsibility requires reasonable reliance; it was not reasonable for a commercial lender to rely on the email without verifying facts that were within its own knowledge and files.
The Lord Ordinary’s findings—that the Plaintiff Lender acted unreasonably and that such reliance was not foreseeable—were evaluative conclusions entitled to appellate deference.

Respondent’s (Plaintiff’s) Arguments

The Defendant Solicitor’s professional status, knowledge that the Plaintiff Lender had no independent legal adviser, and the urgent nature of the request created a “special relationship” giving rise to an assumption of responsibility.
The Plaintiff Lender’s reliance was foreseeable because the Defendant Solicitor demanded immediate action and supplied the discharge deeds.
The Inner House was correct to substitute its own evaluation and impose liability for the undisputed economic loss.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hedley Byrne v Heller [1964]	Liability for negligent misstatement arises where the defendant assumes responsibility and reliance is reasonable and foreseeable.	Foundation for analysing whether the Defendant Solicitor assumed responsibility toward the Plaintiff Lender.
Customs & Excise v Barclays Bank [2006]	Described Hedley Byrne as the “fountain” of modern economic loss claims.	Contextual reference to the continuing importance of Hedley Byrne.
Smith v Eric S Bush [1990]	Three-fold test (foreseeability, proximity, and justice) and criticism of assumption-of-responsibility as a literal test.	Cited to show later evolution of the law after Hedley Byrne.
Caparo v Dickman [1990]	Warned against using proximity/fairness as free-standing tests; endorsed incremental development.	Re-affirmed the need for reasonable reliance and foreseeability.
Sutherland Shire Council v Heyman (1985)	Preference for incremental extension of negligence categories.	Quoted within Caparo; relied on for approach to novel duties.
Michael v Chief Constable of South Wales [2015]	Clarified that Caparo did not endorse a universal three-fold test.	Cited to emphasise the correct analytical framework.
Robinson v Chief Constable of West Yorkshire [2018]	Recent restatement that negligence duties develop incrementally.	Support for using established categories rather than new broad tests.
James McNaughton v Hicks Anderson [1991]	Difficulties of proving entitlement to rely without independent checks in arm’s-length business transactions.	Used to illustrate why the Plaintiff Lender’s reliance was unreasonable.
Spring v Guardian Assurance [1995]	Assumption of responsibility in employment references.	Example of solicitor-like professional assuming responsibility.
Henderson v Merrett Syndicates [1995]	Assumption of responsibility applies beyond contract.	Cited as continuing authority for assumption-based liability.
Williams v Natural Life Health Foods [1998]	Endorsed assumption of responsibility as core rationalisation.	Reinforced the centrality of that concept.
Ross v Caunters [1980]	Solicitor’s primary duty is to own client, not the opposite party.	Used to underline the presumptive absence of duty to an opposite party.
Jain v Trent Strategic Health Authority [2009]	No general duty of care between adversarial litigants.	Parallel reasoning for opposing parties in transactions.
Allied Finance v Haddow [1983]	Solicitor liable where certification was intended to be relied upon by third party.	Example of a “special case” where duty existed.
Midland Bank v Cameron Thom [1988]	Set four factors for solicitor liability to third parties.	Fourth factor (foreseeability of reliance) emphasised by Supreme Court.
Al-Kandari v J R Brown [1988]	Solicitor “stepping outside” normal role may owe opposite party a duty.	Illustrative but distinguishable; solicitor expressly took responsibility.
Gran Gelato v Richcliff [1992]	Ordinary transactional communications rarely create solicitor duties to other side.	Cited as authority supporting the Defendants’ position.
Connell v Odlum [1993]	Potential duty where solicitor’s statutory certificate expected to be relied on.	Example of arguable but not decided liability.
Dean v Allin & Watts [2001]	Solicitor liable where lender relied on solicitor to put effective security in place.	Contrasted with present facts; lender here could and should check its own file.
In re B (A Child) [2013]	Appellate courts should not disturb a trial judge’s evaluative conclusions unless wrong.	Ground for deferring to the Lord Ordinary’s findings.

Court's Reasoning and Analysis

Judge Wilson, delivering the unanimous judgment, applied the Hedley Byrne assumption-of-responsibility framework. A solicitor will owe a duty of care to the opposite party only in “special cases” where:

The opposite party’s reliance on the solicitor’s representation is reasonable; and
Such reliance is, or ought to be, foreseeable to the solicitor.

The Supreme Court held that those conditions were not satisfied:

The alleged facts (whether the entire loan was being repaid) were wholly within the Plaintiff Lender’s own knowledge and records. It was therefore unreasonable for a sophisticated commercial lender to rely solely on an email from the borrower’s solicitor without internal verification.
Because such reliance was unreasonable, the Defendant Solicitor could not reasonably have foreseen it. Consequently, she did not assume responsibility toward the Plaintiff Lender when sending the email.
Precedents involving solicitor liability to third parties (e.g., Allied Finance, Dean v Allin & Watts) were distinguishable: in those cases the solicitor knew the third party would rely and the third party lacked ready means of verification.
The Inner House’s majority erred in bypassing the reasonableness inquiry and in substituting its own evaluation for that of the Lord Ordinary. Under In re B, appellate interference with an evaluative finding requires demonstrable error, which was absent.

Holding and Implications

Appeal ALLOWED; the Lord Ordinary’s interlocutor dismissing the claim is restored.

Consequently, judgment is entered for the Defendants and the Plaintiff Lender recovers no damages. The decision re-affirms that, in commercial settings, professional liability for negligent misstatements hinges on the objective reasonableness of the claimant’s reliance and the foreseeability of that reliance. No new category of solicitor liability was created; the case reinforces existing limits rather than establishing new precedent.

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Steel & Anor v NRAM Ltd (formerly NRAM Plc) (Scotland)