Purchase of land — Bank loan — Solicitors acting for purchaser — Undertaking to bank to use moneys only to acquire “good marketable title” — Right of way over property — Sale of redeveloped property prevented — Bank alleging loss incurred as result of solicitors’ breach of undertaking — Bank’s claim for damages failed
In 1987 Treadlanes Ltd bought at auction land at 12 Nevill Road, Rottingdean, Sussex. Barclays Bank plc lent £155,000 towards the purchase price of £200,000. At that time they were unaware that the land was subject to a right of way by the owner of the adjoining property, Y. The land had the benefit of planning permission for the demolition of existing buildings and the erection of five cottages to form a courtyard together with five car parking spaces.
The solicitors investigated the title and discovered the right of way. They were asked to act on Treadlanes’ behalf the day after the auction. They had not seen the planning permission and did not know the precise implications for the proposed development. The solicitors gave the bank an undertaking that the sums received from the bank would be applied solely for acquiring a “good marketable title” to the property. Completion took place, but Treadlanes were unable to reach agreement with Y over his right of way. Treadlanes were unable to resell the land at auction with the existing right of way. They applied to the council for modification of the planning permission, which was refused. The property was finally sold in December 1995 producing a net recovery for the bank of £172,413.
The bank brought a claim for damages against the solicitors for breach of the undertaking as a result of which the bank suffered loss and damage. The bank argued that the term “good marketable title” was a technical legal term which bore the technical meaning of a title free from all incumbrances. The solicitors contended that a good marketable title was to be contrasted with a good holding title and was one which the vendor was able to force an unwilling purchaser to accept as the title for which the purchaser had contracted.
Held The bank’s claim for damages failed.
1. The phrase “good marketable title” was capable of bearing the meaning contended for by the solicitors.
2. The undertaking required by the bank emphasised the requirement that the title documents obtained by the solicitors should be sent to the bank. The undertaking properly construed referred forward to the steps to be taken at completion, not back to rights and obligations which had already been the subject of the contract between the vendor and the purchaser. Had it intended to do so it would have used the term “open market title”, which bore the technical meaning of a title free from incumbrances.
3. The court bore in mind, as part of the surrounding circumstances, that not only (putting it at its lowest) banks did, on occasions, make their own inquiries on title but, where they instructed solicitors to investigate title on their behalf, they expected to pay them a separate fee even in those cases where they had also investigated title on behalf of the purchaser.
4. The court was also mindful of the timing. The undertaking was only sought immediately before completion. The bank could have been expected to have asked at a much earlier stage that the solicitors should be instructed so that there would be a proper opportunity to investigate the terms of the contract if necessary.
5. Accordingly, the undertaking properly construed bore the meaning contended for by the defendants.
Jonathan Nash (instructed by Lovell White Durrant) appeared for the bank; Genevra Caws QC (instructed by Blake Lapthorn) appeared for the solicitors.
