Shared ownership lease containing mortgage protection clause – Prior written approval of housing association required – Housing association relying upon absence of written approval to resist mortgagee’s claim – Mortgagee alleging against solicitors’ negligence and breach of duty and obtaining summary judgment – Solicitors appealing – Whether evidence showing triable issue – Appeal allowed
Between 1989 and 1991 Halifax plc (Halifax) engaged solicitors to act on its behalf as prospective mortgagee of “shared ownership leases”, a form of hybrid tenure introduced by the Housing Act 1980, granted to lessees by housing associations. The Housing Corporation produced a model form of shared ownership lease containing a mortgage protection clause (MPC). The four leases with which the action was concerned were in that model form, and the MPC in each provided that Halifax could rely on it to enforce its security if it, Halifax, and the terms of the mortgage had been approved by the housing association in writing, prior to the mortgage. Halifax maintained that the four defendants, the firms of solicitors whom it instructed in writing to “act for (it) in the transaction”, negligently failed to secure that prior written approval. In each case, Halifax, in due course, had occasion to enforce its security and sell the property. The lessee’s indebtedness exceeded the net proceeds of sale, but the housing association relied on the absence of its prior written approval in maintaining that Halifax was therefore not entitled to recover mortgage moneys out of its, the housing assocation’s, retained share of the property. Halifax accepted this stance and brought proceedings against the solicitors in negligence and breach of contract and successfully obtained summary judgment. The solicitors contended that there was a triable issue and appealed submitting, inter alia, that: (1) on the proper construction of the words of Halifax’s instructions, there was no duty within the scope of their retainer to ensure that Halifax obtained a valid and effective security; (2) the MPC itself was not so clearly worded as to make the obtaining of approvals a condition precedent to it taking effect; (3) the judge had had insufficient evidence upon which to find that Halifax had acted in reliance on a belief that the solicitors had obtained written express approvals on a transaction by transaction basis; and (4) their (assumed) failure to obtain the approvals, which deprived Halifax of the benefit of the MPC, depended on questions which could not be properly resolved until Halifax had called evidence of the reasons for its decision not to litigate the matter with the housing associations.
Held The appeals were allowed.
1. On the terms of Halifax’s written instructions and on the evidence already available, there was a triable issue whether it was within the solicitors’ retainer that they should concern themselves with the relations between Halifax and the housing associations, in particular as to the existence and form of the latter’s approvals for the purpose of the MPC.
2. There was a triable issue on the effect of the requirement of approvals in the MPC to give it effect as between the housing associations and Halifax as assignee of the lease in the event of default by the lessee. The solicitors’ defence that the absence of written approvals was not fatal to the activation of the MPC on assignment of the lease to Halifax, deserved proper examination at trial.
3. The solicitors’ evidence before the judge, and as supplemented by fresh evidence admitted with leave of the court, showed a triable issue of causation, turning on what Halifax or the housing associations would have said or done if the solicitors had raised the matter of approvals with either of them at the time, and was not one which was “all surmise and Micawberism”: see Lady Anne Tennant v Associated Newspapers Group Ltd [1979] FSR 298 per Megarry V-C.
4. It was arguable on the material before the court that Halifax had a case of estoppel or waiver as against the housing associations. Pilkington v Wood [1953] Ch 770 per Harman J, at p777, was not an exhaustive code of criteria material to an assessment whether it would have been reaonable to expect Halifax to have litigated with the housing associations.
Rupert Jackson QC and Sue Carr (instructed by Wansbroughs Willey Hargrave) appeared for the appellants; Anthony Mann QC and Derek Holwill (instructed by Hammond Suddards, of Leeds) appeared for the respondent.
Carolyn Toulmin, barrister
