Category: Insurance case law · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed June 2026
Supreme Court authority on the scope of a solicitor’s duty of care to a lender where a negligent misstatement is made by the borrower’s solicitor outside the solicitor’s retainer.
NRAM Ltd (formerly Northern Rock (Asset Management) plc) had advanced a secured loan to a corporate borrower, Headway Caledonian Ltd, secured by standard securities over four units at a business park in Scotland. The borrower wished to sell one of the four units, and proposed that the sale proceeds be used to reduce, but not extinguish, the loan; the remaining three units would continue to stand as security for the residual debt.
The borrower’s solicitor, Ms Jane Steel of Bell & Scott LLP, sent an email to NRAM in 2007 in connection with the sale. The email asked NRAM to release the security over all four units against payment of the sale proceeds, and stated (incorrectly) that the loan was being repaid in full. The email was a unilateral and unsolicited communication from the borrower’s side. NRAM, without checking its own records or seeking confirmation, executed deeds of release for all four units. The error was not detected for several years, by which time the borrower had become insolvent and the residual security was lost.
NRAM sued Ms Steel and her firm in delict (the Scots-law equivalent of tort) for negligent misstatement, claiming the lost value of the residual security. NRAM alleged that Ms Steel had assumed responsibility for the accuracy of the representations in the email and that NRAM had reasonably relied on them.
The Outer House at first instance dismissed the claim. The Inner House (Extra Division) reversed and found Ms Steel liable. Ms Steel appealed to the Supreme Court.
The central issue was whether a solicitor acting for one party in a transaction owes a duty of care to the counterparty in respect of statements made to that counterparty during the course of the transaction. Specifically, the case required the Supreme Court to apply the Hedley Byrne assumption-of-responsibility test to determine whether Ms Steel had assumed responsibility to NRAM for the accuracy of her email, and whether it was reasonable for NRAM, a sophisticated commercial lender with its own records, to rely on the representations without independent verification.
The case also raised wider questions about the boundaries of the solicitor’s duty: when does a representation made to a counterparty in the ordinary course of transactional correspondence give rise to a duty enforceable in tort, and when does the absence of contractual privity (and the presence of a separate professional duty owed to the counterparty’s own solicitor) preclude such a duty?
The Supreme Court (Lord Wilson giving the leading judgment, with Lord Mance, Lord Reed, Lord Hodge and Lady Black agreeing) unanimously allowed Ms Steel’s appeal and held that no duty of care was owed.
The court held that the Hedley Byrne assumption-of-responsibility test required, in addition to a clear representation, that it be reasonable for the recipient to rely on it without independent inquiry. On the facts, NRAM was a sophisticated commercial lender with full access to its own records of the loan and security. The representations in Ms Steel’s email were unsolicited communications from the borrower’s side, made in a context where NRAM would ordinarily be expected to check its own files before executing releases of security.
Lord Wilson emphasised that solicitors do not generally owe duties to the opposing party in a transaction. The court rejected the argument that the email created a freestanding tortious duty to verify the accuracy of the statement. NRAM’s reliance, while real, was not reasonable in the sense required for the Hedley Byrne duty to crystallise: it was not within the realistic expectation of a competent solicitor on the borrower’s side that the lender would simply act on an unverified email rather than consulting its own records.
The court reaffirmed the Hedley Byrne test as the orthodox basis for liability for negligent misstatement, and applied it strictly. The result was that the firm escaped liability and NRAM bore the loss of the security.
A solicitor acting for one party to a transaction does not generally owe a duty of care to the counterparty in respect of statements made in correspondence. Liability for negligent misstatement under Hedley Byrne requires both an assumption of responsibility by the maker of the statement and reasonable reliance by the recipient. Where the recipient is a sophisticated commercial party with independent means of verifying the statement, reliance on an unverified representation by the counterparty’s solicitor is not reasonable, and no duty of care arises.
Steel v NRAM is a major modern authority in solicitors’ PI law and is of particular importance to PI insurers covering conveyancing, banking and commercial transactional practice. It restored a clearer dividing line between the solicitor’s duties to the client and to the counterparty, which had been eroded by some pre-2018 first-instance decisions extending Hedley Byrne to transactional correspondence.
For PI insurers, Steel v NRAM provides a robust defence to claims by lenders, counterparties and third parties who allege reliance on representations in the course of routine transactional correspondence. The decision underscores that the recipient’s sophistication, access to independent information, and the context of the communication are all relevant to whether reliance was reasonable. Volume conveyancing firms benefit particularly: emails from buyer’s solicitors to lenders, and vice versa, are now far less likely to give rise to standalone tortious duties beyond the existing professional undertakings framework.
The case sits alongside, but does not displace, the Bowerman line on the solicitor’s duty to the lender client where joint representation exists. Mortgage Express v Bowerman applies where the solicitor acts for the lender; Steel v NRAM applies where the solicitor acts only for the borrower or counterparty.
The case also feeds into SAAMCO scope-of-duty analysis: where a duty does arise, the scope-of-duty principle from Manchester Building Society v Grant Thornton [2021] UKSC 20 and Hughes-Holland v BPE Solicitors [2017] UKSC 21 limits recoverable loss. PI insurers should expect Steel v NRAM to be the first line of defence on duty, and SAAMCO/Manchester Building Society to be the second line on scope of recovery.
Solicitors should nevertheless treat transactional correspondence with care: undertakings remain enforceable, and intentional or reckless misstatements may engage fraud or deceit liability outside Hedley Byrne.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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