Dear Colleagues,

The UK Supreme Court has today given a short judgment relevant to liability in negligence for pure economic loss in the Scots appeal of Steel v NRAM Ltd [2018] UKSC 13 https://www.supremecourt.uk/cases/docs/uksc-2016-0111-judgment.pdf.

Lord Wilson pitches the bare facts thus:

[1] “A makes a careless misrepresentation 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.”

The Supreme Court allows A’s Appeal.

There is a Cook’s tour of authorities on duty of care (including the recent Robinson case). There is also some discussion of the first instance and Inner House approaches to the law and the facts, but the main takeaway is the reaffirmation (at [23]) of the “need for a representee to establish that it was reasonable for him to have relied on the representation and that the representor should reasonably have foreseen that he would do so”, which Lord Wilson derives from Caparo.

A couple of Lord Wilson’s main conclusions are as follows:

[35] ... “Overarchingly, however, neither the general jurisprudence relating to liability in negligence for a misrepresentation leading to economic loss nor the focussed jurisprudence relating to a solicitor’s liability to the opposite party in that regard supports a conclusion that it is not always necessary for the representee to establish that it was reasonable for him to have relied on the representation. On the contrary, the reasonableness of his reliance on it is, as I have explained, central to the concept of an assumption of responsibility.”

And 

[38] “We should accept that a commercial lender about to implement an agreement with its borrower referable to its security does not act reasonably if it proceeds upon no more than a description of its terms put forward by or on behalf of the borrower. The lender knows the terms of the agreement and indeed, as in this case, is likely to have evolved and proposed them. Insofar as the particular officers in Northern Rock who on 23 March 2007 saw and acted upon the email had never been aware of the terms or had forgotten them, immediate access to the correct terms lay - literally - at their finger-tips. No authority has been cited to the court, nor discovered by me in preparing this judgment, in which it has been held that there was an assumption of responsibility for a careless misrepresentation about a fact wholly within the knowledge of the representee. The explanation is, no doubt, that in such circumstances it is not reasonable for the representee to rely on the representation without checking its accuracy and that it is, by contrast, reasonable for the representor not to foresee that he would do so.”

Best wishes,

James