ROYAL BANK OF SCOTLAND PLC V JAMES O'DONNELL AND IAN MCDONALD [2014] ScotCS CSIH_84 (16 October 2014)

ROYAL BANK OF SCOTLAND PLC V JAMES O'DONNELL AND IAN MCDONALD [2014] ScotCS CSIH_84 (16 October 2014)

The guarantee was induced by negligent misrepresentation by the bank. The bank's representatives made positive assertions about the value of the security property without disclosing material qualifications in the valuation report. After receiving the valuation letter, the bank owed a duty to inform the respondents of its indicative and limited nature. The failure to do so was negligent and induced the respondents to grant the guarantee. The guarantee was therefore reducible, and the respondents were entitled to repayment of sums paid by way of interest.

Citation
[2014] ScotCS CSIH_84
Parties
Pursuer and Reclaimer: Royal Bank of Scotland PLC; Defender and Respondent: James O'Donnell; Defender and Respondent: Ian McDonald
Jurisdiction
Scotland
Judgment Date
16 October 2014
Procedural Posture
Commercial Action (guarantee Enforcement and Counterclaim for Reduction) / Appeal (reclaiming Motion) From Decision of Lord Ordinary After Proof
Outcome
Appeal refused; decree of absolvitor in principal action affirmed; decree of reduction and payment in counterclaim affirmed.
Legal Topics
Misrepresentation, Negligent Misstatement, Guarantee/suretyship, Reduction of Contract, Duty of Care, Half Truths in Representations
Contract Law Banking Law Tort/delict Misrepresentation Negligent Misstatement Guarantee/suretyship Reduction of Contract Duty of Care +1 more

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Parties

Royal Bank of Scotland PLC

Pursuer and Reclaimer

James O'Donnell

Defender and Respondent

Ian McDonald

Defender and Respondent

Procedural Posture

Commercial Action (guarantee Enforcement and Counterclaim for Reduction) / Appeal (reclaiming Motion) From Decision of Lord Ordinary After Proof

Legal Issues

  1. 1 Whether the guarantee was induced by misrepresentation (innocent or negligent) by the bank
  2. 2 Whether the bank owed and breached a duty of care in making representations about the valuation
  3. 3 Whether the respondents are entitled to reduction of the guarantee and damages for interest paid

Ratio Decidendi

The guarantee was induced by negligent misrepresentation by the bank. The bank's representatives made positive assertions about the value of the security property without disclosing material qualifications in the valuation report. After receiving the valuation letter, the bank owed a duty to inform the respondents of its indicative and limited nature. The failure to do so was negligent and induced the respondents to grant the guarantee. The guarantee was therefore reducible, and the respondents were entitled to repayment of sums paid by way of interest.

Court Disposition

Appeal refused; decree of absolvitor in principal action affirmed; decree of reduction and payment in counterclaim affirmed.

Orders

  • Guarantee dated 20 March 2009 reduced
  • Respondents assoilzied from conclusions of the summons