This is an Outer House case in which Northern Rock sought damages from the solicitor of one of its customers. Headway Caledonian Ltd borrowed sums from Northern Rock to finance the purchase of a Business Park in Hamilton. In return it granted a standard security in favour of Northern Rock. Some years later, Headway’s solicitor sent a draft discharge of the standard security to Northern Rock requesting that it sign and return the document. In the accompanying email, the solicitor stated that the company intended to sell the subjects and redeem the loan. However, that information was incorrect as Headway only intended to sell part of the subjects and to redeem part of the loan. (The reason for the error was unknown.)

Northern Rock (which had not instructed solicitors to act on its behalf in the transaction) relied on the email and granted the discharge of the standard security. The solicitor then registered it in the Land Register. As a result the loan became unsecured. Headway then became insolvent and Northern Rock raised an action for damages against the solicitor and her firm in respect of its losses.

The solicitor argued that the lender was a third party to whom she did not owe a duty of care.

Lord Woolman considered the authorities on liability for economic loss including Midland Bank plc v Cameron, Thom, Peterkin & Duncans[1] in which Lord Jauncey identified four conditions that should normally be present for liability in such cases:

“…

1. the solicitor must assume responsibility for the advice or information furnished to the third party;
2. the solicitor must let it be known to the third party expressly or impliedly that he claims, by reason of his calling, to have the requisite skill or knowledge to give the advice or furnish the information;
3. the third party must have relied upon that advice or information as a matter for which the solicitor has assumed personal responsibility; and
4. the solicitor must have been aware that the third party was likely so to rely.”

Lord Woolman found that liability in delict[2] could not be decided without hearing the evidence and allowed a proof.

The full judgement is available from Scottish Courts here.