Standard form undertaking – Undertaking by solicitors to banks to facilitate completion of contracts for purchase of land – Meaning of “good marketable title” – Whether obligation assumed on giving undertaking absolute or qualified
The Guide to the Professional Conduct of Solicitors contained a standard form of undertaking given by solicitors to banks, to facilitate the completion of contracts for the purchase of land which included the words: ” We undertake (a) that any sums received from you or your customer for the purpose of this transaction will be applied solely for acquiring a good marketable title to such property . . . (b) after the property has been acquired . . . to send the title deeds . . . and documents to you and in the meantime to hold them to your order”.
In three cases the bank sought damages for breach of the undertaking against the solicitor who had given it, claiming that the solicitor parted with the money on completion of the purchase of the relevant property, but failed to obtain a title to the property, which provided satisfactory security for the bank. In the first action, this was because the property was subject to a right of way which precluded its successful development. The judge held that the solicitor was not in breach of the undertaking. In the second action, it was because there was no access to the property and there were insufficient rights of drainage and other services to allow for its development. The judge held that the solicitor had committed a breach of the undertaking in both respects. In the third action the property was owned by three co-owners. One of them had not consented to the sale and her signature on the conveyance of sale was forged. The judge held that the solicitor had applied the money in accordance with the undertaking even though, through no fault of his own, no title was obtained.
In all three actions: (a) the bank had lent money to its own customer for a particular transaction known to the bank; (b) the transaction was briefly described in the undertaking; (c) the extent of the bank’s knowledge of the transaction was not known to the solicitors; (d) except in the second action, and then only in relation to the registration of its security, the bank did not instruct the solicitors to act for it in the transaction; (e) the bank did not ask the solicitors to provide a report on title or to advise in relation to any aspect of the transaction; and (f) the solicitors were not paid by the bank for their services. The appeals raised issues, inter alia, as to: (1) the meaning of “for acquiring a good marketable title to such property”; and (2) whether the obligation which the solicitors assumed by giving the undertaking was absolute or qualified.
Held The appeals were dismissed.
1. The bank’s submission that “good marketable title” meant “a freehold title free from incumbrances” confused the subject-matter of the sale with the vendor’s duty to prove his title to the subject-matter of the sale. A “good marketable title” was a title which, though technically defective, was one which the purchaser was bound to accept. The vendor’s obligation was to deduce sufficient title to the property which he had contracted to sell, and the expression described the quality of the evidence which the purchaser was bound to accept as sufficient to discharge this obligation. The expression was a compendious one describing the title and not the property. The property was described in the undertaking to enable the parties to indentify the transaction to which the undertaking related, not the property which the purchaser was acquiring. The undertaking was to be construed as an undertaking not to part with the money, except for a good marketable title to the property, which was the subject-matter of the transaction briefly described in the document.
2. What the solicitors undertook to obtain in exchange for the money was what a reasonably competent solicitor acting with proper skill and care would accept as a good marketable title, and not what was in fact a good marketable title. The obligation was thus qualified and not absolute as the bank had contended.
Simon Berry QC and Jonathan Nash (instructed by Lovell White Durrant) appeared for the appellant bank; Mark Hapgood QC and Richard McManus (instructed by Blake Lapthorn, of Fareham) appeared for the respondent solicitors, Dean and others.
Simon Berry QC and Nigel Jones (instructed by Eversheds, of Cardiff) appeared for the appellant bank; Mark Hapgood QC and Peter Cranfield (instructed by Wansbroughs Willey Hargrave, of Bristol) appeared for the respondent solicitors, Lougher and others.
Simon Berry QC and Michael Sullivan (instructed by Eversheds, of Cardiff) appeared for the appellant bank; Mark Hapgood QC and David Halpern (instructed by Morgan Bruce, of Cardiff) appeared for the respondent solicitors, Hopkin & Co.
