Plaintiff instructing defendant solicitors to report on title to property – Report negligent – Second defendant being held out as partner – Plaintiff suffering loss – Whether plaintiff relying on representation that second defendant a partner – Judge holding second defendant liable – Second defendant’s appeal allowed
In June 1990 the first defendant, L, was a sole principal practising under the name Brian Lewis & Co, solicitors, (the firm). The second defendant, W, at L’s invitation, joined the firm as a “salaried partner” in July 1990. W was not entitled to a share of the profits although he was described as a salaried partner, and he became a signatory on the firm’s bank accounts on the basis that he was not liable for the firm’s overdraft. His name appeared on the firm’s notepaper. In May 1991 the plaintiff, Nationwide Building Society (Nationwide), decided to retain the firm and on May 8 sent it a copy of its “instructions to solicitors”. L replied on May 10 enclosing its report on title, which Nationwide received on May 13. Nationwide decided to proceed with the advance and the transaction was completed. However, the mortgagor fell into arrears and the plaintiff, on realising its security, faced a large loss.
The plaintiff issued proceedings against the firm claiming damages for negligence and/or breach of retainer. L was subsequently adjudged bankrupt and removed from the roll of solicitors. The Solicitors Indemnity Fund refused to indemnify him against the claim. The plaintiff looked to W as a partner in the firm at the material time and therefore liable for any negligence on the part of L. W claimed that he had not been a partner and had not so held himself out. Hearing a preliminary issue, the judge held that W was liable on the basis that he was held out as a partner of L. W appealed contending that although the judge had rightly held that, in order to succeed against W, Nationwide had to prove that it placed reliance upon W’s apparent status as a partner, and that, on the evidence, Nationwide had not established such reliance as at May 8 1991, neverthelss he had erred in holding that: (1) May 8 1991 was not the only important date for the purpose; (2) the question of reliance was to be considered on the date when Nationwide received L’s letter dated May 10 1991; and (3) on that date Nationwide had placed reliance on W’s apparent status as partner.
Held The appeal was allowed.
1. By agreeing to have his name appearing on the notepaper, the second defendant agreed to the first defendant holding him out on the notepaper as a partner. The second defendant would have been liable therefore for the relevant loss, which was the loss suffered by the plaintiff by acting on the negligent report, if it could be shown that the plaintiff had relied on the representation on the notepaper. However, the burden of proof was upon the plaintiff to show that it relied on this representation. There was no evidence that the plaintiff knew who were the partners or had ever seen the firm’s notepaper before it received the reply and report on May 13 1991.
2. The retainer was contained in the plaintiff’s instructions dated May 8 1991, which constituted an offer to retain the firm, whoever might be the persons constituting that firm. The retainer was accepted by the first defendant when he posted the letter dated May 10 1991 enclosing the report on title. The contract of retainer was concluded then.
3. The plaintiff’s submission that it must be presumed to have relied upon a composite representation, namely that the plaintiff relied on the representation that the second defendant was a partner and that the title was good, could not be accepted. There was no evidence that the plaintiff, when acting upon the representation as to title, knew of the existence of the second defendant. The burden of proof on the plaintiff had not been discharged.
Rupert Jackson QC and Paul Parker (instructed by Reynolds Porter Chamberlain) appeared for the appellant; Nicholas Patten QC and Timothy Higginson (instructed by the solicitor to Nationwide Building Society) appeared for the respondent.
