Where, in the course of carrying out their instructions, solicitors representing lenders come into possession of information that is clearly significant to their clients – for example, indicating that a security has recently changed hands at a much lower price – they have a duty to report this to them: Mortgage Express v Bowerman & Partners [1996] 2 All ER 836.
Do provisions in the Council of Mortgage Lenders’ Handbook that post-date Bowerman, combined with Solicitors’ Practice Rules listing the duties that solicitors can undertake for lenders when acting in residential conveyancing transactions, and the form of certificate of title that solicitors must give in such cases – all of which are designed to limit what solicitors can be required to do – oust the Bowerman duty?
The question arose in E Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147; [2015] PLSCS 318 in proceedings under the Civil Liability (Contribution) Act 1978, which applies where two parties are liable in respect of the same damage. A firm of valuers that valued a property at £725,000 had paid £200,000 to settle a subsequent negligence claim by the lender. The firm then issued proceedings against the solicitors instructed by the lender, claiming that they were equally liable for the loss. They argued that the law firm should have informed the lender that the registers of title revealed that the borrower had acquired the property for £390,000 less than 6 months previously. They argued that this would have caused the lender to contact them and that they would have corrected their valuation.
The trial judge upheld the valuers’ claim, but the Court of Appeal has overturned the decision. Their Lordships agreed that the price paid information obtained from the Land Registry was not materially different from the information provided by the borrower, who had informed the lender that he acquired the property for £450,000. The discrepancy with the valuation cast doubt on the valuers’ figure, but the lender had still approved the loan – and, in the absence of evidence to show that the lender would have reacted differently, had it been properly informed, the valuers’ claim against the law firm must fail.
Residential conveyancers will be disappointed to hear that the court firmly rejected arguments that the terms and conditions on which the law firm had acted oust the Bowerman duty. Solicitors instructed on the terms of the Handbook are not required to undertake work outside the scope of their instructions. But if, while undertaking work within the Solicitors’ Practice Rules, they come into possession of non-confidential information that adversely affects the title to, or value of, a security, they are under a duty to report it to the lender. The relevant Practice Rule states that solicitors should make appropriate searches in public registers and report any results that might adversely affect a lender.
Searches at the Land Registry fall within this category and the Handbook expressly states that its contents do “not affect any responsibilities you have to us under the general law” and obliges conveyancers to inform lenders of anything that they “should reasonably expect us to consider important in deciding whether or not to lend to the borrower”. The price paid information obtained from the Land Registry strongly suggested that the valuation was excessive. Therefore, the Bowerman duty was engaged.
Allyson Colby is a property law consultant