Plaintiff and husband seeking mortgage including life insurance cover – Insurance company needing further information to proceed with application – Solicitor carrying out conveyance before life insurance policy in place – Whether negligent – Plaintiff’s claim succeeding
The plaintiff (K) married her husband in March 1992. They subsequently wished to sell their studio flat and buy a one-bedroom house. Abbey National advised them as to the financing of their proposal, on a “package” that included life cover “mortgage protection” with Friends’ Provident to cover the full amount of the loan for the mortgage term. K and her husband confirmed the position and completed the necessary application forms for the mortgage and the life insurance cover. Friends’ Provident requested a medical examination of Mr Knight and GP reports for both. In September 1992 Friends’ Provident wrote to Abbey National and Mr Knight, stating that they had requested further medical information and could not proceed with the application until it had been received. However, four days later, the defendant firm exchanged and completed the transactions and K and her husband moved into the property. On 7 October 1992 Mr Knight died. The defendant was notified of the death and contacted Abbey National. Friends’ Provident confirmed that the policy had never been issued. K fell into arrears on the mortgage repayments and in March 1995 a possession order was made in favour of Abbey National. K alleged she had suffered loss as a result of the negligence of the defendant firm and claimed in both contract and tort.
Held The plaintiff’s claim suceeded.
This was one of the minority of cases where it was possible and sensible to exchange and complete at the same time. There was an added responsibility on the solicitor to ensure that everything that needed to be done before completion was done before exchange took place. The solicitor knew on the day of completion that life insurance cover was not in place and was aware of his clients’ reliance upon life insurance cover. He owed them a duty of care, as a reasonably competent practitioner, to ensure that contracts were not exchanged until such cover was in force, or that if there was a problem regarding the cover, to seek instructions and only to exchange upon clear and specific instructions from the clients, having first advised them as to the risk involved. The solicitor was in breach of that duty of care. Judgment was awarded for the plaintiff in the sum of £78,844.27.
Charles Joseph (instructed by Stephens Innocent) appeared for the plaintiff; Ian Holtum (instructed by Henmans, of Oxford) appeared for the defendant.
Sarah Addenbrooke, barrister
