Solicitors often ask clients to pre-sign documents to facilitate completion of a conveyancing transaction. Where both parties need to sign a transfer, the buyer will usually sign first. This enables the seller to retain control of the instrument, once he has signed it, until the transaction is completed and the money has been paid.
However, it is not always possible to do things by the book. What is the position if it is more convenient for the seller to sign first and for the seller’s solicitors to pass the document to the buyer’s solicitors for signature by the buyer but otherwise to be held to their order until completion?
The litigation in Guy v Mace & Jones [2012] EWHC 1022 (Ch) was caused by the misuse of a pre-signed transfer, which was handed to the buyer’s solicitors and was then released to the buyer for signature. The buyer, who has since fled the country, used the transfer to secure a registered title and then mortgaged the land. The seller tried to block a subsequent sale by the lender and, when the Court of Appeal ruled against him (Barclays Bank plc v Guy [2008] EWCA Civ 452), issued professional negligence claims against several of the legal firms involved. The High Court dismissed the case, which turned on its own particular and complex set of facts and a changing cast of law firms.
In the course of his judgment, the judge had cause to consider whether the seller’s solicitor had been negligent when he released the pre-signed transfer to the buyer’s solicitor on the basis of an understanding that its release was solely so that the buyer could execute it and that it would otherwise be held to the seller’s solicitor order. The judge commented that it would have been better if the understanding had been confirmed in writing. However, he did not consider that the seller’s solicitor had been negligent, especially as the parties had envisaged that completion would take place four days later.
The matter went quiet for several weeks and the seller’s solicitor terminated his retainer with the seller. Was the law firm in breach of its duty to its client because it failed to recover the pre-signed transfer before closing its file? The judge took the view that, arguably, it was. Although the seller’s solicitor understood that the transaction might still proceed, it might fairly be said that he should have recovered the transfer (and that the buyer’s solicitor should have asked the buyer to return it after signing it). However, in the circumstances of this particular case, any such failings were overtaken by the judge’s conclusion that the seller actually knew about, and approved, the eventual transfer of the land and then chose to do nothing about it until it was too late.
Most law firms use checklists, before closing files, to ensure that there are no loose ends. The circumstances of this case were unusual. Nonetheless, the judge’s comments suggest that, where this is not already covered, practitioners would be well-advised to add a new reminder to their checklists: to check the whereabouts of and, if necessary, recover any pre-signed documents before closing their files.
Allyson Colby is a property law consultant
