Solicitor – Legal advice – Duty of care – Respondent solicitors advising appellant client not to sign documents giving up substantial assets including interest in family home but without giving further advice — Another solicitor in same firm witnessing signatures and certifying appellant freely agreeing to disposal of interests without undue influence after consequences of transaction explained – Whether respondents giving reasonable advice in circumstances — Whether respondents in breach of duty to appellant – Appeal allowed
The appellant had been informed by her husband, a financial consultant, and his solicitor that he had taken money from a client and to avoid his being sent to prison they had to sell their home and give the money to that client. As a result, the appellant would have to give up her interest in their home and other assets. Her husband’s solicitor told the appellant to seek independent legal advice as a formality but to ignore any advice not to sign.
The appellant sought advice from the respondent solicitors concerning the transaction and, in a brief interview lasting around 15 minutes, which was free of charge, the appellant explained that she intended to proceed with the transaction to avoid her husband going to prison, for the sake of their children. The solicitor advised her not to sign the documents but did not arrange a further meeting. The appellant and her husband subsequently visited another branch of the respondents, taking four draft documents including a mortgage and charges over other assets. There they saw a solicitor who witnessed the signatures of the appellant and her husband but did not give any advice. However, he certified in the mortgage that the appellant had had the consequences of the transactions explained to her by a solicitor, that he was satisfied that she understood the nature of the transactions and to the best of his knowledge she freely consented to it without undue influence or misrepresentation.
When the appellant’s husband was later prosecuted for fraud, convicted and sentenced to six years in prison, the appellant brought proceedings against the respondents for damages for negligent advice in connection with the transaction. The appellant claimed that the respondents had failed properly to advise her in connection with the transaction whereby she had lost her interest in her home, certain endowment policies, shares and pensions.
The judge stopped the trial after the appellant had given evidence, finding that there was no case for the respondents to answer. The appellant appealed. The central issue was whether the judge had been right to conclude that the respondents had not been in breach of their duty to the appellant.
Held: The appeal was allowed.
The observations of Lord Nicholls in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773, para. 64–68 were a good guide to the appropriate approach where an individual (whether or not a wife) sought advice from a solicitor about an intended provision of significant security in a transaction which, at least on the face of it, would be for the sole financial benefit of another person who was in a close personal relationship with the individual.
In the light of the certificate made by the solicitor on the mortgage and the confirmation in the deed in which he had witnessed the signatures, the solicitor had confirmed that the appellant had been given appropriate legal advice about the mortgage and, to the best of his knowledge, had understood the effect of the mortgage and was not acting under undue influence or pursuant to a misrepresentation. Given that the certificate and the statement were intended to protect the other party to the transaction from any subsequent claim by the appellant to set aside the mortgage or the other documents on the ground of undue influence or misrepresentation, it had to follow that the solicitor had accepted for himself and thus for the respondents, a concomitant obligation to the appellant to advise and question her (or at least to take all reasonable steps to satisfy himself that she had been advised and questioned) to the extent that a reasonably competent solicitor, making the certificate witnessing the deed with the statement, would have done in all the circumstances.
The provision of the bald advice not to enter into the transaction could not have been a sufficient discharge of the respondents’ duty to the appellant on her first visit to them. The solicitor ought to have emphasised to the appellant the desirability of exploring why she was prepared to put her home and assets at severe risk simply to protect a husband who had turned out to be a fraudster. The appellant’s answer, that it was to protect the children from their father being sent to prison, cried out for further examination. A solicitor, properly advising her about the proposed transaction, ought to have told the appellant of the importance of finding out all the relevant facts before she executed the four documents. If the solicitor had discovered that the defalcations were far more extensive than the appellant’s husband had admitted to her, any solicitor would have been bound to tell her that, to put it at its lowest, it was very unlikely that, by executing the four documents, she would save her husband from prosecution or prison.
The solicitor’s duty on those facts was no different from what it would have been if the appellant had been charged with offences. On the basis of the evidence that the judge had heard and read and his primary findings of fact the judge had been wrong to conclude that the respondents had complied with their duty to the appellant for the reasons which he had given, and the court could not conclude that the appellant would have acted no differently if she had been properly advised. Accordingly there had to be a new trial in front of a different judge.
Richard Owen Thomas (instructed by Samuels, of Barnstaple) appeared for the appellant; Karen Shuman (instructed by Ashfords LLP, of Exeter) appeared for the respondents.
Eileen O’Grady, barrister