Solicitor acting for lender and borrower – Whether solicitor under duty to report to lender matters material to borrower’s creditworthiness – Whether opening words of general instructions excluding specific duty – Application to strike out statement of claim dismissed
The plaintiff, in its capacity as a mortgage lender, instructed the defendant to investigate the title of a property, Trennicks, Valley Park, Tregoney Hill, Mevagissey, Cornwall, which it was proposing to take as security for a loan which it was intending to make to G, the borrower. On January 15 1991 the plaintiff offered to lend G £128,000. The plaintiff instructed the defendant to act for it. The defendant was already acting for G. The opening words of the plaintiff’s general instructions stated: “Neither the General Instructions to Solicitors set out herein or the form of Report on Title detract from or limit the general responsibility of the Solicitor instructed by the Lender under general law as Solicitor for the Lender”. The defendant submitted its report on title to the effect that the title was good and marketable. The transaction was thereafter completed by the payment of £129,180, which was applied in the purchase of the property. Thereafter the borrower defaulted. The plaintiff obtained possession of the property and eventually sold it in 1992 for £80,000. The plaintiff brought an action claiming, inter alia, by para 14.2 that the defendant had failed to inform the plaintiff that the borrower’s financial situation was “serious and precarious”. The defendant applied to strike out para 14.2 on the grounds that it disclosed no reasonable cause of action. Relying upon National Home Loans Corp plc v Giffen Couch & Archer [1997] 3 All ER 808, the defendant submitted, inter alia, that a solicitor acting for both lender and borrower did not owe the lender a duty to report matters material to the borrower’s creditworthiness, and that the opening words of the general instructions did not affect the proper construction of the remaining instructions. The plaintiffs submitted, inter alia, that there was a duty under the general law to advise the plaintiff of the circumstances which came to the knowledge of the defendant, in any event such a duty was not excluded, but expressly required to be discharged under the plaintiff’s general standing instructions, and in any event the scope of the duty of care was one of fact and degree.
Held The defendant’s application was dismissed.
1. There was an apparent divergence between Mortgage Express Ltd v Bowerman & Partners [1996] 1 EGLR 126 and National Home Loans Corp plc v Giffen Couch & Archer (supra) as to the extent of the duty to report non-confidential matters of which the solicitor came to learn in the course of carrying out his instructions. However, a reconciliation could be achieved on the grounds that each case had to be considered on its own merits and circumstances, and that therefore there was no general rule of the kind for which the defendant had contended. The scope of the solicitor’s duty was a matter of fact and degree and it would clearly not be right to strike out nor, if there was a general rule that the duty of a solicitor acting for a lender and for the borrower was simply to follow the specific instructions given and no more, to deprive the plaintiff of the opportunity of establishing the facts pending a decision by an appellate court.
2. The opening words of the general instructions were clear: whatever specific duties might be required of the solicitor, he was also obliged to discharge any general duty of care which he might have to the lender. There was an overriding general duty to report matters of potential significance to the plainitff and the opening words were to be read as preserving and not excluding or diminishing such a general duty.
Nigel Jones (instructed by Eversheds) appeared for the plaintiff; Patrick Lawrence (instructed by Bond Pearce) appeared for the defendant.
