Mortgage transaction – Solicitors acting for borrower and lender – Solicitors instructed by lender to advise wife and obtain her signature – Deeds signed by impostor – Construction of retainer – Whether solicitors’ duty to obtain wife’s signature absolute – Whether solicitors only obliged to exercise reasonable skill and care – Judge dismissing bank’s claim in breach – Appeal dismissed
From 1970 D and his company were customers of the plaintiff bank. D’s wife was the sole owner of Greystokes, Symondbury, Dorset. In July 1985 the limit on the company’s overdraft at the bank was increased to £75,000, and, in return, D deposited with the bank the deeds and conveyance of the property. He also deposited a letter of consent purportedly signed by his wife in the presence of a firm of solicitors, which had signed an assurance that “the contents of this document have been fully explained to [the wife] and she fully understands their portent and has signed the documents of her own free will”. In fact, the document was not signed by the wife but by someone else. In September 1987 D obtained a valuation of the property of £225,000-£275,000, which he used to persuade the bank to lend him money secured on the property to pay off the debts that the company owed to the bank. The security was to be an “all moneys” security. The bank was aware that it would be necessary for the wife to have independent legal advice before she executed the security. On 18 March 1988 the bank wrote to the defendant firm of solicitors. The document was returned to the bank, apparently properly completed, with the wife’s signature shown as being witnessed by a legal executive . Subsequently the bank sought to rely on their charge. It was then discovered that it had not been signed by the wife but by an impostor, who had been introduced by D to the legal executive as his wife.
The bank issued proceedings claiming damages against the solicitors for, inter alia, non-performance by the defendant of its retainer. The judge dismissed the bank’s claim. The bank appealed, relying on Zwebner v Mortgage Corporation Ltd [1998] EGCS 104; [1998] PLSCS 194, contending that the defendant’s failure to obtain the wife’s signature was in breach of its retainer, contrary to the strict obligation it had accepted.
Held: The appeal was dismissed.
1. In the provision of services, the normal standard of responsibility of solicitors, in the absence of any agreement to the contrary, was to exercise reasonable skill and care. Accordingly, the issue was whether the bank had intended to ask for and whether the solicitors had intended to promise to answer for the fraud of the customer, even if that fraud could not be detected by exercising all proper care. The answer was to be “no”, unless the language used in the retainer compellingly indicated otherwise.
2. The obligation had not been to “properly execute” the documents, but to obtain the signature of D and his wife and to certify, not undertake, that the wife understood the document and signed it of her own free will. Furthermore, for solicitors, an undertaking was of a particular significance that did not apply to a certificate. Although those did not amount to dramatic distinctions from Zwebner v Mortgage Corporation, which was to be given wide application, it could be concluded that on the facts the judge had come to the right decision that the obligation was not absolute. If a commercial institution wished to impose an absolute obligation on members of a profession, they were to do so in clear terms so that the solicitors could appreciate the extent of the obligation that they were accepting: Barclays Bank plc v Weeks Legg & Dean [1998] 40 EG 182 considered.
Nicholas Stewart QC and Hugh Mercer (instructed by Gateley Wareing, of Birmingham) appeared for the appellant; Alastair Norris QC (instructed by Pinsent Curtis) appeared for the respondent.
Thomas Elliott, barrister
