Bank instructing solicitor in relation to legal charge – Whether notes on security for loans produced by bank and sent to solicitor part of retainer – Whether certified security schedule amounting to warranty – Whether solicitor acting in accordance with common practice – Bank’s claim dismissed – Appeal dismissed
The defendant firm of solicitors was retained to act in connection with the taking of a second charge over 4 Woodchurch Drive, Bromley, Kent (the matrimonial home), and a first charge over an hotel in Seaham, Kent. The defendant was instructed to return a completed and certified security schedule. After corresponding with the husband and wife’s solicitors, the defendant returned the completed schedule. The first plaintiff made an advance of £150,000 to the husband to assist in the purchase of the hotel, and an advance of £360,000 to a company he controlled to purchase a public house. At the time of the loan, the first plaintiff had produced guidance notes for solicitors instructed to deal with security work on its behalf, which the defendant had seen and was familiar with. Both the husband and the company went into default under the terms of the advances. The hotel and public house were sold, leaving a deficiency of £336,000.
On 30 March 1994 the first plaintiff commenced proceedings for possession of the matrimonial home. The wife, who had remained in the property, contested the proceedings alleging that the execution of the mortgage had been procured by the undue influence of her husband, of which the first plaintiff had actual or constructive notice. The first plaintiff and the second plaintiff, to whom the benefit of the loans had been assigned, commenced proceedings against the defendant alleging breach of its retainer and negligence. The judge made an order for possession and held that the defendant had been led to believe that the solicitors were acting for both the husband and wife, and that the defendant was accordingly entitled to assume that the wife had been separately advised. The plaintiffs appealed.
Held The appeal was dismissed.
1. The notes produced by the plaintiffs informed solicitors of the need to satisfy themselves that a guarantor had been advised to seek independent legal advice. If it had been intended that they were to impose a duty on solicitors over and above the usual standard of reasonable skill and care, they would have been in different terms and the certified security schedule would have required confirmation that the steps advised in the notes had been taken. Although a lender might be able to require a solicitor to take certain particular steps to ensure that a lender’s consent is obtained, it must be done in clear terms.
2. The certified security schedule completed by the defendant confirmed that a good and marketable charge had been made to the first plaintiff. The certificate required the defendant to confirm that it had made such inquiries as it thought necessary to satisfy itself that there was no known prospect of a challenge being made to the security; it did not amount to a warranty that there would be no challenge to the security.
3. There was no evidence that the defendant had not acted in accordance with the common practice at that time by not obtaining written confirmation from the husband and wife’s solicitors that the wife had been independently advised. Therefore, it could not be concluded that the defendant had been in breach of duty.
John Jarvis QC and Peter Cranfield (instructed by Shoosmiths & Harrison, of Northampton) appeared for the plaintiffs; Iain Hughes QC and Beverly-Ann Rogers (instructed by Ince & Co) appeared for the defendant.
Thomas Elliott, barrister
