Sale of land – Solicitors – Warranty of authority – Firm of solicitors instructed to act on sale of property by person fraudulently impersonating owner of that property – Solicitor settling claim brought by claimant purchasers for breach of warranty of authority to act for registered freehold owner – Whether such warranty in fact given – Whether settlement moneys extinguishing loss such as to preclude claims against other parties who received purchase moneys – Claims dismissed The sixth defendant firm of solicitors was instructed to act for the vendor on a sale of a residential property to the claimants. In fact, the purported vendor, the fifth defendant, did not own the property but was impersonating the true owner, with whom he shared the same name. The sixth defendant ostensibly completed the sale to the claimants; after receiving the purchase price of £1.25m, it transferred those funds into various accounts as instructed by the fifth defendant, save for £1,800 in respect of its own fees. The funds paid into those accounts were ultimately distributed among the various other defendants. The claimants brought an action against the sixth defendant for breach of an alleged warranty that it had been authorised and instructed by the registered freehold owner to act for him on the sale. That claim was settled by a consent order, under which the sixth defendant paid £1.2m, plus costs, to the claimants. The claimants also brought claims against the other defendants for conspiracy to defraud and/or dishonest assistance in a breach of trust. By the date of trial, the sixth defendant had transferred a further £58,200 to the claimants; the fourth defendant, in his pleaded defence, maintained that that sum represented a repayment by him of the moneys that he had received from the purchase price. In addition, judgment had been entered against the ninth defendant for £18,095, plus interest, and the seventh defendant had agreed to pay £17,500 in settlement of the claims against her. After the first two days of trial, further settlements were reached with the second and eighth defendants for the repayment of sums of £75,000 and £98,000 respectively. The fifth defendant could not be traced. At trial, an issue arose as to whether the claimants could establish any loss recoverable against the remaining defendants or whether their loss had been extinguished by the sums already recovered under the settlements. A particular issue was whether the entirety of the sum paid by the sixth defendant in settlement of the breach of warranty claim should be taken into account for that purpose; that turned on whether, in the absence of a settlement, the damages for breach of warranty would have extended to loss of a bargain, on the basis that the property had actually been worth £1.5m at the date of the purported sale. Held: The claims were dismissed. (1) The warranty for which the claimants contended was an unusual one, being, in effect, a warranty by the sixth defendant that the person who instructed it was who he said he was. Any such warranty was contrary to the normal principle that a solicitor did not warrant any particular attribute of its client; the duty of a solicitor was to take reasonable care and skill and the court should not readily impose an absolute, unqualified obligation amounting to a guarantee of its client’s identity and title: Midland Bank plc v Cox McQueen [1999] PNLR 593; [1999] EGCS 12 and Platform Funding Ltd v Bank of Scotland plc [2008] EWCA Civ 930; [2008] 3 EGLR 83; [2008] 42 EG 168 applied. A solicitor might be under a duty of care in tort, owed to those dealing through it with its ostensible client, to take reasonable care to satisfy itself as to the identity of the client. However, that was conceptually different from a warranty. Even if some warranty of authority on the part of the sixth defendant were implied, it could only be a limited warranty that it acted for a person who called himself by a certain name, rather than that the person actually had that name or was the true owner of the property. Consequently, the sixth defendant had not actually been liable to the claimants at all. (2) Further, even if the sixth defendant had warranted to the claimants that the fifth defendant was the true owner of the property, that would not have enabled the claimants to recover the claimed £1.5m in damages. Whatever warranty the sixth defendant gave, it never purported to be able to bind the vendor; accordingly, the warranty would not have the consequence, if true, that the vendor of the property was bound to sell to the claimants at £1.25m. Where a solicitor warranted that it had authority to act on behalf of its client in a conveyancing transaction, but did not purport to have authority to sign any contract on its client’s behalf, then the measure of damages for breach of warranty was limited to the loss suffered as a result of embarking on the ultimately ineffective transaction and did not include damages for loss of bargain. The solicitor was not liable in such cases for loss of any profit that the intending purchaser had anticipated from a successful transaction: Penn v Bristol & West Building Society [1997] 1 WLR 1356; [1997] EGCS 54 and Bristol & West Building Society v Fancy & Jackson [1997] 4 All ER 582 considered. (3) On the evidence, the first and third defendants were liable for conspiracy to defraud the claimants, while the 10th defendant was liable for dishonest assistance in a breach of trust. When assessing damages against those defendants, the entirety of the sum paid by the sixth defendant in settlement of the breach of warranty claim fell to be taken into account, as did the sums paid, or payable, under the settlements with the other defendants. The claimants should not recover a greater amount than the damage they had in fact suffered: Townsend v Stone Toms & Partners (1984) 27 BLR 26 applied. The claimants’ losses were the sum of £1.25m, paid as the purchase price of the property, plus certain legal and other costs thrown away, in the sum of £13,052. Those losses were extinguished by the sums paid or payable by the other defendants. Consequently, the liability of the first, third and 10th defendants was likewise extinguished. Charles Douthwaite (instructed by Fladgate LLP) appeared for the claimants; William Willson (instructed by LP Evans) appeared for the eighth defendant for the first two days of trial only; the first defendant appeared in person, the second defendant appeared in person for the first two days of trial only; the other seven defendants did not appear and were not represented. Sally Dobson, barrister
Sale of land – Solicitors – Warranty of authority – Firm of solicitors instructed to act on sale of property by person fraudulently impersonating owner of that property – Solicitor settling claim brought by claimant purchasers for breach of warranty of authority to act for registered freehold owner – Whether such warranty in fact given – Whether settlement moneys extinguishing loss such as to preclude claims against other parties who received purchase moneys – Claims dismissed
The sixth defendant firm of solicitors was instructed to act for the vendor on a sale of a residential property to the claimants. In fact, the purported vendor, the fifth defendant, did not own the property but was impersonating the true owner, with whom he shared the same name. The sixth defendant ostensibly completed the sale to the claimants; after receiving the purchase price of £1.25m, it transferred those funds into various accounts as instructed by the fifth defendant, save for £1,800 in respect of its own fees. The funds paid into those accounts were ultimately distributed among the various other defendants.
The claimants brought an action against the sixth defendant for breach of an alleged warranty that it had been authorised and instructed by the registered freehold owner to act for him on the sale. That claim was settled by a consent order, under which the sixth defendant paid £1.2m, plus costs, to the claimants. The claimants also brought claims against the other defendants for conspiracy to defraud and/or dishonest assistance in a breach of trust.
By the date of trial, the sixth defendant had transferred a further £58,200 to the claimants; the fourth defendant, in his pleaded defence, maintained that that sum represented a repayment by him of the moneys that he had received from the purchase price. In addition, judgment had been entered against the ninth defendant for £18,095, plus interest, and the seventh defendant had agreed to pay £17,500 in settlement of the claims against her. After the first two days of trial, further settlements were reached with the second and eighth defendants for the repayment of sums of £75,000 and £98,000 respectively. The fifth defendant could not be traced.
At trial, an issue arose as to whether the claimants could establish any loss recoverable against the remaining defendants or whether their loss had been extinguished by the sums already recovered under the settlements. A particular issue was whether the entirety of the sum paid by the sixth defendant in settlement of the breach of warranty claim should be taken into account for that purpose; that turned on whether, in the absence of a settlement, the damages for breach of warranty would have extended to loss of a bargain, on the basis that the property had actually been worth £1.5m at the date of the purported sale.
Held: The claims were dismissed.
(1) The warranty for which the claimants contended was an unusual one, being, in effect, a warranty by the sixth defendant that the person who instructed it was who he said he was. Any such warranty was contrary to the normal principle that a solicitor did not warrant any particular attribute of its client; the duty of a solicitor was to take reasonable care and skill and the court should not readily impose an absolute, unqualified obligation amounting to a guarantee of its client’s identity and title: Midland Bank plc v Cox McQueen [1999] PNLR 593; [1999] EGCS 12 and Platform Funding Ltd v Bank of Scotland plc [2008] EWCA Civ 930; [2008] 3 EGLR 83; [2008] 42 EG 168 applied. A solicitor might be under a duty of care in tort, owed to those dealing through it with its ostensible client, to take reasonable care to satisfy itself as to the identity of the client. However, that was conceptually different from a warranty. Even if some warranty of authority on the part of the sixth defendant were implied, it could only be a limited warranty that it acted for a person who called himself by a certain name, rather than that the person actually had that name or was the true owner of the property. Consequently, the sixth defendant had not actually been liable to the claimants at all.
(2) Further, even if the sixth defendant had warranted to the claimants that the fifth defendant was the true owner of the property, that would not have enabled the claimants to recover the claimed £1.5m in damages. Whatever warranty the sixth defendant gave, it never purported to be able to bind the vendor; accordingly, the warranty would not have the consequence, if true, that the vendor of the property was bound to sell to the claimants at £1.25m. Where a solicitor warranted that it had authority to act on behalf of its client in a conveyancing transaction, but did not purport to have authority to sign any contract on its client’s behalf, then the measure of damages for breach of warranty was limited to the loss suffered as a result of embarking on the ultimately ineffective transaction and did not include damages for loss of bargain. The solicitor was not liable in such cases for loss of any profit that the intending purchaser had anticipated from a successful transaction: Penn v Bristol & West Building Society [1997] 1 WLR 1356; [1997] EGCS 54 and Bristol & West Building Society v Fancy & Jackson [1997] 4 All ER 582 considered.
(3) On the evidence, the first and third defendants were liable for conspiracy to defraud the claimants, while the 10th defendant was liable for dishonest assistance in a breach of trust. When assessing damages against those defendants, the entirety of the sum paid by the sixth defendant in settlement of the breach of warranty claim fell to be taken into account, as did the sums paid, or payable, under the settlements with the other defendants. The claimants should not recover a greater amount than the damage they had in fact suffered: Townsend v Stone Toms & Partners (1984) 27 BLR 26 applied. The claimants’ losses were the sum of £1.25m, paid as the purchase price of the property, plus certain legal and other costs thrown away, in the sum of £13,052. Those losses were extinguished by the sums paid or payable by the other defendants. Consequently, the liability of the first, third and 10th defendants was likewise extinguished.
Charles Douthwaite (instructed by Fladgate LLP) appeared for the claimants; William Willson (instructed by LP Evans) appeared for the eighth defendant for the first two days of trial only; the first defendant appeared in person, the second defendant appeared in person for the first two days of trial only; the other seven defendants did not appear and were not represented.
Sally Dobson, barrister
