ROYAL BANK OF SCOTLAND v. JAMES O'DONNELL+IAN McDONALD, 28 May 2013, Lord Malcolm [2013] ScotCS CSOH_78

ROYAL BANK OF SCOTLAND v. JAMES O'DONNELL+IAN McDONALD, 28 May 2013, Lord Malcolm [2013] ScotCS CSOH_78

The defenders' personal guarantee was induced by negligent misrepresentations by the pursuers' agent regarding the nature and reliability of a site valuation. The bank's agent failed to disclose that the valuation was only indicative and not suitable for lending purposes, and repeated assurances that a professional valuation at £2 million had been obtained. The defenders relied on these misrepresentations in granting the guarantee. The pursuers breached their duty of care, entitling the defenders to reduction of the guarantee and damages for losses directly sustained.

Citation
[2013] ScotCS CSOH_78
Parties
Pursuer: Royal Bank of Scotland; Defender: James O'Donnell; Defender: Ian McDonald
Jurisdiction
Scotland
Procedural Posture
Commercial Action (guarantee Enforcement and Counterclaim) / Judgment After Proof
Outcome
Defenders absolved in principal action; decree of reduction of guarantee granted; damages for losses to be determined after further hearing.
Legal Topics
Misrepresentation, Personal Guarantees, Duty of Care, Reduction of Contract, Damages for Negligent Misrepresentation
Contract Law Banking Law Tort/delict Misrepresentation Personal Guarantees Duty of Care Reduction of Contract Damages for Negligent Misrepresentation

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Parties

Royal Bank of Scotland

Pursuer

James O'Donnell

Defender

Ian McDonald

Defender

Procedural Posture

Commercial Action (guarantee Enforcement and Counterclaim) / Judgment After Proof

Legal Issues

  1. 1 Whether the defenders' personal guarantee was induced by misrepresentation or negligent misrepresentation by the pursuers' agent
  2. 2 Whether the defenders are entitled to reduction of the guarantee and/or damages for losses sustained

Ratio Decidendi

The defenders' personal guarantee was induced by negligent misrepresentations by the pursuers' agent regarding the nature and reliability of a site valuation. The bank's agent failed to disclose that the valuation was only indicative and not suitable for lending purposes, and repeated assurances that a professional valuation at £2 million had been obtained. The defenders relied on these misrepresentations in granting the guarantee. The pursuers breached their duty of care, entitling the defenders to reduction of the guarantee and damages for losses directly sustained.

Court Disposition

Defenders absolved in principal action; decree of reduction of guarantee granted; damages for losses to be determined after further hearing.

Orders

  • Absolves the defenders from the conclusions in the principal action.
  • Grants decree of reduction of the guarantee as sought in the counterclaim.