The editor of this section of the site is Nigel Clayton of Kings Chambers, Leeds and Manchester. Nigel also maintains the specialist website dealing with mortgages at www.legalmortgage.co.uk
There are three cases this month:
- Whether it was reasonable for a lender to rely on a representation made to it without verifying?
- Whether a borrower remained liable to council tax after the lender appointed receivers?
- Whether a Court Order obtained by use of forged documents which led to alteration of the Land Register is a “mistake” capable of being corrected?
Discharge – negligent misrepresentation.
Steel v Nram Ltd
 UKSC 13
It was not reasonable for a commercial lender to rely on a representation from a borrower’s solicitor about the discharge of its security without checking it.
Lender L granted borrower B a loan secured on several units. B proposed to sell one of the units and agreed with L a release of that unit from the security, subject to a partial repayment. Shortly before completion, B’s solicitor emailed L wrongly stating that the whole loan was to be repaid and asked for execution of deeds of discharge over all the units. L did not check the position and discharged the entire security.
B subsequently went into liquidation. L sued B’s solicitors for damages for negligent misrepresentation.
On what grounds can a lender sue a borrower’s solicitor for negligent misrepresentation which results in the loss of its security?
The trial judge (the Lord Ordinary) dismissed the claim holding that:
- it was not reasonable for L to have relied on the solicitor’s representations without checking their accuracy, and
- it was reasonable for the solicitor not to have foreseen that it would do so.
Decision on first appeal
The appeal court (Extra Division of the Inner House of the Court of Session) allowed the appeal holding that:
- the solicitor had assumed responsibility for the representations since they fell within her area of expertise, an ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW
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