Solicitor acting for purchaser and lending society — Admitted negligent failure to disclose facts — Lender seeking to recover loss on forced sale of property from solicitor — High Court confirming summary judgment for breach of contract, negligence, and breach of trust — Court of Appeal allowing appeal — Breach of trust not established
The defendant was a solicitor who acted for T and his wife in the purchase of 17 Thameshill Avenue, Romford, Essex, for £73,000. He also acted for the plaintiff building society to which the purchasers applied. The society offered to advance £59,000 on the security of a first mortgage of the property on the express condition that, unless otherwise agreed in writing, the balance was to be provided by the purchasers and that no second mortgage was being arranged. In his report to the society the defendant confirmed that to the best of his knowledge and belief the balance of the purchase money was being provided by the purchasers without resort to further borrowing and that the special condition would be complied with. He failed to disclose that the purchasers were arranging a second mortgage.
The purchasers defaulted and the society enforced its security. The property was sold, realising under £53,000. The society claimed the whole of its net loss from the defendant, alleging breach of contract and negligence (which were admitted); and breach of trust (which was denied). There was no allegation of dishonesty or bad faith. The district judge gave summary judgment on the claims for breach of contract and negligence with damages to be assessed; and for breach of trust, in the sum of £59,000 less the sums received on sale of the property. That was confirmed by the High Court, but the defendant appealed.
Held The appeal was allowed.
1. Where a client sued his solicitor for negligent failure to give him proper advice, he had to show what advice should have been given and (on balance of probabilities) that if such advice had been given he would not have entered into the relevant transaction either at all or on the terms he did. The same applied where the complaint was that the solicitor had failed in his duty to give material information: see Mortgage Express Ltd v Bowerman & Partners [1995] 1 EGLR 129.
2. Where, however, a client sued his solicitor for negligently giving incorrect advice or information, it was sufficient for the plaintiff to prove that he relied on the advice or information, ie that he would not have acted as he did if he had not been given such advice. It was not necessary to prove that he would not have acted as he did if he had been given the property advice or the correct information: see Downs v Chappell unreported April 3 1996.
3. In the present case the society had proved the causal link between the defendant’s negligence and the making of the mortgage advance but had not yet established the amount of its loss (if any) which was properly attributable to the defendant’s negligence. Damages remained to be assessed: see South Australia Asset Management Corporation v York Montague Ltd [1996] 27 EG 125.
4. The defendant was not guilty of breach of trust or breach of fiduciary duty. He was in a situation where he owed duties to two clients which might conflict. But he did not prefer the interests of one client to that of another; at most he was guilty of negligence which had that unintended effect.
5. The case would be remitted to the High Court for an assessment of common law damages.
Jonathan Sumption QC and Glenn Campbell (instructed by Wansbroughs Willey Hargrave) appeared for the appellant solicitor; Nicholas Patten QC and Timothy Higginson (instructed by Osborne Clarke, of Bristol) appeared for the building society.
