Guy v Mace & Jones and others
Solicitor’s negligence – Sale of land – Defendant firms of solicitors acting for parties on proposed sale of land – Claimant vendor alleging that transaction aborted but transfer of land then fraudulently procured by purchaser – Whether defendants owing duty of care – Whether in breach of duty – Whether any such breach causative of loss – Claims dismissed
The claimant was in the business of acquiring development sites which he then cleaned up with a view to their onward sale at a profit. In 1998, he identified a derelict brownfield site in Manchester as suitable for that purpose. He obtained finance for the purchase from an acquaintance, L, through a finance company of which L was a director; he proceeded to acquire the land in three separate lots in 2003. In June 2004, the land was transferred to TAL Ltd, a Gibraltar company controlled by L; title was subsequently registered in TAL Ltd’s name. In late 2006, the finance company went into administration owing millions of pounds. L was disqualified as a director in connection with his conduct of another company and, after being convicted of contempt of court and a passport offence, he fled the jurisdiction.
The claimant alleged that transfer of the land to TAL Ltd had been procured by fraud and that this had been facilitated by the negligence of the three defendant firms of solicitors, each of which was therefore liable to him for the value of the land and associated costs. The negligence was alleged to arise out of a proposed sale of the land to TAL Ltd in April 2004. The second defendant had acted for the claimant in that transaction until it terminated its retainer in late June 2004. The third defendant, which had initially acted for L and his companies, was then retained by the claimant instead, and L instructed the first defendant.
The claimant alleged that, although he had signed a transfer and form of contract at a meeting in April 2004, shortly before going on a trip abroad, he had aborted the proposed transaction on his return. He claimed that despite this, a sale price of £15m had subsequently been added to the contract and transfer and the transfer had been completed and registered, without his authority, through the fraudulent actions of L.
The first defendant accepted that it had dated the signed transfer and sent it to the Land Registry to complete registration, but it denied owing any duty of care to the claimant. The second defendant admitted a duty of care but denied any breach. The third defendant admitted breach of duty in releasing the transfer to L but disputed causation and loss.
Held: The claims were dismissed.
(A) The court found the following facts:
At the time of the transfer of the land to the company in 2004, there was no reason to question the integrity of L. On the evidence, a sale price of £15m had been agreed and all versions of the contract and transfer passing between the parties had contained that figure. At a meeting between the parties prior to the claimant’s departure abroad, the second defendant had taken the claimant through the contract and transfer, explained the main terms to him, including the £15m purchase price, and obtained his confirmation that he understood the documents and was happy with them; the claimant had signed those documents to facilitate simultaneous exchange and completion in accordance with his instructions. Since the transfer required two signatories on behalf of TAL Ltd, and only L was present at the relevant meeting, the second defendant had agreed to release the document to the third defendant so that the latter could arrange for it to be signed. The second defendant had done this on an implied understanding that the release was solely for the purpose of obtaining execution by TAL Ltd and that the transfer was otherwise held to the second defendant’s order. The third defendant had passed the transfer on to L; the third defendant conceded that its failure then to ask L to give it back was a breach of duty. The first defendant had subsequently dated the transfer and applied for its registration on L’s instructions; L had told it that the purchase price had been paid and that only the formalities remained to be completed. The first defendant had checked this with the third defendant, which confirmed that it was acting for the claimant, and, after reverting to the claimant about the matter, confirmed that it had instructions for exchange and completion to proceed that day.
(B) On the facts as found:
(1) Although the first defendant’s actions in dating and procuring registration of the transfer had been the immediate cause of the claimant being deprived of his ownership of the land, the first defendant was not liable since it owed no duty of care to the claimant. It had received its instructions from L and acted only for TAL Ltd. The claimant had neither met nor spoken to anyone at the first defendant; there was no suggestion that he had relied on it or that it had consciously assumed responsibility towards him. The facts of the case did not establish a duty of care on the premise that the first defendant had, or should have, known that no solicitor was acting for him and that he no longer wanted the matter to proceed. No other aspect of the transaction gave rise to a duty owed by the first defendant to the claimant. The claim against the first defendant therefore failed.
(2) The second defendant owed a duty of care to the claimant as its client but had not breached that duty. It had ceased to act for the claimant well before the transfer was completed and had made that clear to the first defendant. No criticism could be made of its actions in getting the claimant to sign the contract and transfer. It was standard conveyancing practice for a solicitor to get his client to pre-sign documents to be used in an impending transaction, once they had been agreed, rather than wait until the day when the transaction was to be completed. It had not breached its duty by releasing the transfer to the third defendant on an implied understanding as to the purpose of this. Although, once it terminated its retainer, it should perhaps have called on the third defendant to return the signed transfer rather than merely rely on the implied understanding, any breach of duty in that respect was not causative in law of any loss. The fault lay in the third defendant’s action in allowing L to retain the transfer after its delivery to him to obtain a second signature. It followed that the claim against the second defendant also failed.
(3) As to the third defendant, even assuming it was in breach of duty by failing to call for the return of the transfer when it ceased to be instructed by L, and by giving the first defendant the understanding that the claimant was willing to exchange and complete, no liability arose since the claimant could not establish causation or loss. On the evidence, the claimant knew and approved of the transfer of the land to TAL Ltd completed in June 2004. Moreover, even if he had not been aware of it at the time, he had become aware in time to take steps to protect any claim to the land that he might have by registering a caution at the Land Registry. For reasons connected with his dealings with L and another party, he had deliberately, and at a time when he was in receipt of legal advice, held off instructing his then solicitor to take such action until it was too late to do so. Accordingly, his claim against the third defendant, and all the defendants, failed on that ground.
The claimant (assisted by Victoria Gregory, of Janes Solicitors, as his Mackenzie friend) appeared in person; Mark Simpson QC and Spike Charlwood (instructed by DAC Beachcroft LLP, of Manchester) appeared for the first defendant; Ian Gatt QC and Mark Cooper (instructed by Herbert Smith LLP) appeared for the second defendant; Ben Patten QC and Sian Mirchandani (instructed by Weightmans LLP, of Liverpool) appeared for the third defendant.
Sally Dobson, barrister
Solicitor’s negligence – Sale of land – Defendant firms of solicitors acting for parties on proposed sale of land – Claimant vendor alleging that transaction aborted but transfer of land then fraudulently procured by purchaser – Whether defendants owing duty of care – Whether in breach of duty – Whether any such breach causative of loss – Claims dismissedThe claimant was in the business of acquiring development sites which he then cleaned up with a view to their onward sale at a profit. In 1998, he identified a derelict brownfield site in Manchester as suitable for that purpose. He obtained finance for the purchase from an acquaintance, L, through a finance company of which L was a director; he proceeded to acquire the land in three separate lots in 2003. In June 2004, the land was transferred to TAL Ltd, a Gibraltar company controlled by L; title was subsequently registered in TAL Ltd’s name. In late 2006, the finance company went into administration owing millions of pounds. L was disqualified as a director in connection with his conduct of another company and, after being convicted of contempt of court and a passport offence, he fled the jurisdiction.The claimant alleged that transfer of the land to TAL Ltd had been procured by fraud and that this had been facilitated by the negligence of the three defendant firms of solicitors, each of which was therefore liable to him for the value of the land and associated costs. The negligence was alleged to arise out of a proposed sale of the land to TAL Ltd in April 2004. The second defendant had acted for the claimant in that transaction until it terminated its retainer in late June 2004. The third defendant, which had initially acted for L and his companies, was then retained by the claimant instead, and L instructed the first defendant.The claimant alleged that, although he had signed a transfer and form of contract at a meeting in April 2004, shortly before going on a trip abroad, he had aborted the proposed transaction on his return. He claimed that despite this, a sale price of £15m had subsequently been added to the contract and transfer and the transfer had been completed and registered, without his authority, through the fraudulent actions of L.The first defendant accepted that it had dated the signed transfer and sent it to the Land Registry to complete registration, but it denied owing any duty of care to the claimant. The second defendant admitted a duty of care but denied any breach. The third defendant admitted breach of duty in releasing the transfer to L but disputed causation and loss.Held: The claims were dismissed.(A) The court found the following facts:At the time of the transfer of the land to the company in 2004, there was no reason to question the integrity of L. On the evidence, a sale price of £15m had been agreed and all versions of the contract and transfer passing between the parties had contained that figure. At a meeting between the parties prior to the claimant’s departure abroad, the second defendant had taken the claimant through the contract and transfer, explained the main terms to him, including the £15m purchase price, and obtained his confirmation that he understood the documents and was happy with them; the claimant had signed those documents to facilitate simultaneous exchange and completion in accordance with his instructions. Since the transfer required two signatories on behalf of TAL Ltd, and only L was present at the relevant meeting, the second defendant had agreed to release the document to the third defendant so that the latter could arrange for it to be signed. The second defendant had done this on an implied understanding that the release was solely for the purpose of obtaining execution by TAL Ltd and that the transfer was otherwise held to the second defendant’s order. The third defendant had passed the transfer on to L; the third defendant conceded that its failure then to ask L to give it back was a breach of duty. The first defendant had subsequently dated the transfer and applied for its registration on L’s instructions; L had told it that the purchase price had been paid and that only the formalities remained to be completed. The first defendant had checked this with the third defendant, which confirmed that it was acting for the claimant, and, after reverting to the claimant about the matter, confirmed that it had instructions for exchange and completion to proceed that day.(B) On the facts as found:(1) Although the first defendant’s actions in dating and procuring registration of the transfer had been the immediate cause of the claimant being deprived of his ownership of the land, the first defendant was not liable since it owed no duty of care to the claimant. It had received its instructions from L and acted only for TAL Ltd. The claimant had neither met nor spoken to anyone at the first defendant; there was no suggestion that he had relied on it or that it had consciously assumed responsibility towards him. The facts of the case did not establish a duty of care on the premise that the first defendant had, or should have, known that no solicitor was acting for him and that he no longer wanted the matter to proceed. No other aspect of the transaction gave rise to a duty owed by the first defendant to the claimant. The claim against the first defendant therefore failed.(2) The second defendant owed a duty of care to the claimant as its client but had not breached that duty. It had ceased to act for the claimant well before the transfer was completed and had made that clear to the first defendant. No criticism could be made of its actions in getting the claimant to sign the contract and transfer. It was standard conveyancing practice for a solicitor to get his client to pre-sign documents to be used in an impending transaction, once they had been agreed, rather than wait until the day when the transaction was to be completed. It had not breached its duty by releasing the transfer to the third defendant on an implied understanding as to the purpose of this. Although, once it terminated its retainer, it should perhaps have called on the third defendant to return the signed transfer rather than merely rely on the implied understanding, any breach of duty in that respect was not causative in law of any loss. The fault lay in the third defendant’s action in allowing L to retain the transfer after its delivery to him to obtain a second signature. It followed that the claim against the second defendant also failed.(3) As to the third defendant, even assuming it was in breach of duty by failing to call for the return of the transfer when it ceased to be instructed by L, and by giving the first defendant the understanding that the claimant was willing to exchange and complete, no liability arose since the claimant could not establish causation or loss. On the evidence, the claimant knew and approved of the transfer of the land to TAL Ltd completed in June 2004. Moreover, even if he had not been aware of it at the time, he had become aware in time to take steps to protect any claim to the land that he might have by registering a caution at the Land Registry. For reasons connected with his dealings with L and another party, he had deliberately, and at a time when he was in receipt of legal advice, held off instructing his then solicitor to take such action until it was too late to do so. Accordingly, his claim against the third defendant, and all the defendants, failed on that ground.The claimant (assisted by Victoria Gregory, of Janes Solicitors, as his Mackenzie friend) appeared in person; Mark Simpson QC and Spike Charlwood (instructed by DAC Beachcroft LLP, of Manchester) appeared for the first defendant; Ian Gatt QC and Mark Cooper (instructed by Herbert Smith LLP) appeared for the second defendant; Ben Patten QC and Sian Mirchandani (instructed by Weightmans LLP, of Liverpool) appeared for the third defendant.
Sally Dobson, barrister
