Defendant acting for plaintiff and partner in purchase and sale of properties – Finance for purchase provided in part by plaintiff’s mortgage and in part by partner’s share in former matrimonial home – Failure of sale and mistake in refunding subsequent bridging loan – Plaintiff suffering loss – Whether defendant in breach of duty of care
Glebelands, South Woodford, Essex, was jointly owned by Mr and Mrs Wells. Having separated from her husband, Mrs Wells formed a relationship with the plaintiff. In May 1989 the plaintiff and Mrs Wells decided to to buy 27 Cairns Avenue, Woodford Bridge, (Cairns). Mrs Wells instructed the defendant firm of solicitors through D, who was not qualified, but who had acted for Mr and Mrs Wells in several domestic conveyancing matters. The plaintiff did not know D. The purchase price of Cairns was to be financed by a loan of £31,000 from a building society (Nationwide), with the balance from the proceeds of the sale of Glebelands. A mortgage of £31,000 was the maximum the plaintiff could afford; he was to repay the mortgage instalments and would eventually obtain a half-share in the property. Contracts for the sale of Glebelands were exchanged on June 23 1989 and for the purchase of Cairns on June 29 1989. Completion on both was due to take place on July 21 1989. However, the sale of Glebelands did not take place and Mrs Wells’ capital was therefore not available to put into the purchase of Cairns.
At the end of August 1989 the plaintiff and Mrs Wells attended D’s office and the plaintiff signed a form of undertaking and, with Mrs Wells, took out a bridging loan for £66,000 from Nationwide. The undertaking contained no obligations to the plaintiff. The purchase of Cairns was completed on August 25 1989. No security was provided over Glebelands to secure the bridging loan. In July 1990 Mr and Mrs Wells arranged a remortgage of Glebelands for £110,000 to pay off the bridging loan, but, as a result of an error, it was not paid off in full. In the event, Glebelands was not sold until 1994 and no money went towards paying off the remainder of the bridging loan. The plaintiff brought proceedings against the defendant claiming damages for negligence contending that: (1) the defendant had failed to recognise or advise the plaintiff of a conflict of interest in acting for the plaintiff and the vendor of the property; and (2) the defendant had failed to advise the plaintiff, before he signed the bridging loan, that there would be insufficient proceeds from the sale of Glebelands to repay that loan.
Held Judgment was given for the plaintiff.
1. The defendant had not shown the quality of skill and care to be expected of an ordinarily competent solicitor. No attendance note had been kept of any relevant meeting, although the defendant had subsequently changed its practice in that respect. Despite the difficulties of a situation in which the defendant was unable to see the plaintiff and Mr Wells at the same time, the defendant had made no attempt to protect the interests of the plaintiff and no explanation had been given of the available options when the sale of Glebelands failed. Accordingly, the plaintiff had not been in a position to make a proper informed decision.
2. There had been a conflict of interest between Mr Wells and the plaintiff. Mr Wells had had an interest in retaining the proceeds of sale or remortgage of Glebelands and the plaintiff had an interest in having Mrs Wells’ share of the proceeds to pay off the bridging loan on Cairns. It was clear that the defendant should have advised the plaintiff to see another solicitor, but such advice was never given.
Anthony Redevsky (instructed by Talfourds, of Hornchurch) appeared for the plaintiff; Ben Hubble (instructed by Pinsent Curtis) appeared for the defendant.
