Purchase of domestic property — Loans made by plaintiff building society — Defendant firms of solicitors acting for society — Standard form documentation — Defaults on mortgages — Whether solicitors acting in breach of duty of care — 13 actions heard together — Orders accordingly
The plaintiff building society made loans on the purchase of domestic property over a period 1988 to 1991. The defendants were the solicitors who acted for the society in taking security for those loans. The market at the time had been rising steeply. However, a number of the society’s borrowers thereafter defaulted and the society, on realising its security, was left with a shortfall. It sued the individual solicitors’ firms involved alleging, inter alia, breach of duty and in certain instances, failure to disclose facts which ought to have been disclosed to the lender. The Solicitors’ Indemnity Fund stood behind the firms so the dispute was in substance between the society and the fund.
It was a common feature that the borrower instructed his or her own solicitor to act at the time that terms with the vendor were agreed. The firm’s name was then given to the society when the borrower applied for an advance. The society then sent standard form instructions to the solicitor to act on its behalf. Another common feature in all the cases was that the society paid the amount of the advance to the defendant solicitor. The 13 actions in the present case represented only a small proportion of those commenced by the society against solicitors in the Bristol District Registry of the Chancery Division. In some of the actions, the matter came before the judge on appeal from a decision of the district judge; in others, the Ord 14 applications for summary judgment were heard de novo.
The matters were directed to be heard together and arguments on the main issues of principle were submitted by one leading counsel. Junior counsel addressed the court on particular facts (which are not dealt with for the purposes of this summary). The three main groups of cases involved: (1) those in which the defendant received the mortgage moneys from the society based upon a warranty or representation which the defendant knew, or must be taken to have known, to be misleading; (2) those in which the defendant was in breach of the instructions in paying over the mortgage moneys on completion, but where there was an issue of causation to be tried; and (3) those in which the defendant’s alleged breach of duty turned upon some issue or question in dispute which ought to be tried.
Held Orders accordingly.
1. Where moneys had been received by the solicitor from the society following a request based upon a warranty or representation which he knew, or must be taken to have known, was misleading in a material respect, the society was entitled to be compensated for its loss. There was an obligation upon the solicitor to return the moneys forthwith.
2. Cases where the solicitor knew nothing, prior to the receipt of the advance cheque, which ought to have led him to qualify the report which he had signed, were in a different category. In those cases it would be relevant to inquire what would have happened if the defendants had sought further authority from the society before completion so that there was an issue of causation to be tried, viz whether the money would have been lent, in any event, if the true position had been known to the society.
3. Leave to defend would also be given in those cases where there was some issue or question in dispute which ought to be tried in relation to liability.
Michael Burton QC (instructed by Osborne Clarke, of Bristol) appeared for the plaintiff building society; Nicholas Davidson QC (instructed by Pinsent Curtis) appeared for the defendant solicitors.
