“If you are not familiar with the seller’s solicitors…, you must verify that they appear in a legal directory or they are currently on record with the Law Society…as practising at the address shown on their note paper.”
“Mr Wilkes had not dealt with the firm of Rothschild before…He therefore sought to confirm the identity of the practice and the Small Heath Office with the Law Society and the SRA by checking the website. He checked both the branch office and Mr Gill. His investigations confirmed Mr Gill to be a solicitor and a sole practitioner and the existence of the Rothschild practice and the branch office.”
“You must be satisfied that you will be able to certify that the title is good and marketable.”
“The title to the property must be good and marketable free of any…charges or encumbrances which, at the time of completion, might reasonably be expected to materially adversely affect the value of the property…”
“On completion, we require a fully enforceable first charge by way of legal mortgage over the property executed by all owners of the legal estate. All existing charges must be redeemed on or before completion, unless we agree that an existing charge may be postponed…”
“You must hold the loan on trust for us until completion. If completion is delayed, you must return it to us when and how we tell you.”
“You must register our mortgage as a first legal charge at the Land Registry.”
“…that we will have sufficient funds to discharge the mortgage on the property from the proceeds of sale upon completion.”
“4. MORTGAGES (A) Please specify those mortgages or charges which will be discharged on or before completion. GE MONEY MORTGAGE WILL BE DISCHARGED (B) in respect of each subsisting mortgage or charge: (i) Will a vacating receipt, discharge or registered charge or consent to dealing, entitling the Buyer to take the property freed from it, be handed over on completion NOT APPLICABLE (ii) If not, will the Seller’s solicitor give a written undertaking on completion to hand one over later? NOT APPLICABLE (iii) If an undertaking is proposed, what are the suggested terms of it? NOT APPLICABLE 15. … “7. COMPLETION ARRANGEMENTS Please answer any of the following requisitions against which X has been placed in the box. (A) Where will completion take place? AT OUR OFFICE (B) We should like to remit the completion monies direct to your bank account. If you agree, please give the name and branch of your bank, its sort code, and the title and number of the account to be credited. ROTHSCHILD & CO NATWEST BANK ACCOUNT NUMBER: 51##### SORT CODE: ##-##-## (C) In whose favour and for what amounts will banker’s drafts be required on completion? NOT APPLICABLE (D) Please confirm that you will comply with the Law Society’s Code for Completion by Post (1998 Edition).”
“2. On completion, the seller’s solicitor acts as the buyer’s solicitor’s agent without any fee or disbursements. 3. The seller’s solicitor will specify in writing to the buyer’s solicitor before completion the mortgages or charges secured on the property which, on or before completion, will be redeemed or discharged to the extent that they relate to the property. … 9. When completing, the seller’s solicitor undertakes: (i)… (ii) to redeem or obtain discharges for every mortgage or charge so far as it relates to the property specified under paragraph 3 which has not already been redeemed or discharged. … 11. The rights and obligations of the parties, under the contract or otherwise, are not affected by this code.”
“Nothing more was heard from Rothschild Small Heath. Mr Patel was registered as the proprietor at the Land Registry but the GE Money mortgage has not been discharged and no mortgage has been registered in favour of the Nationwide. I was told during the trial that Mr Patel remained so registered, and that the GE Money mortgage continued to be paid. Nationwide has only the protection of a unilateral Notice ranking behind GE Money’s first charge.”
“Several years have passed between the transaction and this trial and I was not told that any proceedings have been taken to rectify the register. As I have said, the GE Money mortgage apparently continues to be paid. No one made any allegations about the vendor, and none would have been relevant to the issues which I have to decide, but equally no one could say for certain that the vendor was not involved in the scam. The vendor may well have been, and be, content for Mr Patel to have the registered title. The scam may be limited to lying to the Law Society (about Rothschild Small Heath being a real branch of Rothschild) and relieving Nationwide of its money.”
“In the present case, Nationwide did not obtain a registered first legal charge or any charge on the Avery Road property, and did not get what they bargained for when they retained Davisons. Davisons were in breach of the terms of their retainer.”
“…the question is whether Davisons had Nationwide’s authority to part with the loan money or acted in breach of trust? This turns on the answer to the question of whether the events of12th March 2009 amounted to completion of the purchase and of the grant of charge such that Davisons can say that they were authorised to release the advance moneys to Rothschild Small Heath. Prior to completion Davisons needed not only clear information about which pre-existing charge was to be redeemed at completion, but also an undertaking from a solicitor that he had GE Money’s authority to receive the sum intended to repay it (Guidance: Law Society’s Code for completion by post paragraph 4(ii)) and an undertaking from a solicitor to redeem or obtain a discharge for that GE Money charge insofar as that had not been done prior to completion (ibid para 9 (ii)). Davisons did not have such undertakings, not least because even the most impeccably worded undertaking from Rothschild Small Heath would not be that of a solicitor. This point is now amply covered by appellate authority. I find that Davisons were therefore in breach of their contract of retainer and acted in breach of trust in parting with the advance.”
“If it appears to the court that a trustee,…, is or may be personally liable for any breach of trust,…, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust…, then the court may relieve him either wholly or partly from personal liability for thesame.”
“Neither the requisitions, nor any other document, contained anything capable of being construed as a solicitor’s undertaking to discharge the first charge on completion. Mr Wilkes’ evidence was that he knew that the word ‘undertaking’ does not have to be used in order for one to be given, and he felt ‘in no doubt’ that the vendor’s solicitors were giving an undertaking in their Replies to the Requisitions. He gave evidence that his conviction in this respect was reinforced by the fact that Rothschild had confirmed that they would follow the Law Society’s Code for Completion by Post which itself provides, by a combination of Paragraphs 3 and 9 that when completing the seller’s solicitor undertakes to redeem or obtain discharges for all undischarged mortgages or charges which have been previously specified to the buyer’s solicitor as being those which will be discharged on or before completion. Rothschild had specified that the GE Money mortgage would be discharged on or before completion and it was obliged to give an undertaking that it would do so. Mr Wilkes put up a vigorous defence of his conduct in cross-examination. I accept that he believed that he had done enough, but in my judgment he had not done what he should have done. He had not got an undertaking in the Law Society’s recommended form, he had not got the replies to Requisitions in the form he had himself requested, that is to say in form TA 13 which also uses the express language of undertaking and draws attention specifically to the fact that undertakings are being given to redeem or discharge the identified charges or mortgages and send the buyer’s solicitor the Form DS1 or other evidence of redemption such as a receipted charge. He could not simply rely on a proposal to adopt the Law Society’s Code for completion by post as being the giving of the undertakings themselves, because the language of the Code does not say that it is. The notes to the Code, especially Note 7, say that information about charges to be redeemed can be given in replies to Requisitions on Title and such replies may themselves be undertakings. Had the Law Society intended that mere adoption of the Code should supplant the need for undertakings to be given separately and clearly, it would have said so in the Code itself, and expressly incorporated the forms of such undertaking. Moreover, the first question of Section 4 of the Requisitions asks for information, not for an undertaking. The answer to that question lists the mortgages which are to be paid off on completion. There might be mortgages or charges which are not being discharged on completion. Simply saying that the mortgage thus specified will be discharged on completion is not an undertaking to make it happen. Assuming that Mr Wilkes knew that the mortgage was not going to be paid off before completion, the answers given to the rest of section 4 of the Requisitions were odd and should have led to Mr Wilkes insisting on clarification of what was to happen on completion; they gave him no information about whether he was going to get a consent to dealing from GE Money on completion, a DS1 or simply an undertaking to hand over a discharge or vacating receipt later, and if so in what terms. This was information which a reasonable and sensible client would expect a reasonably careful solicitor to insist on having, and following through to the giving of the standard form or appropriately varied undertaking itself, before parting with money which he held on trust for his client. It was insufficient for Mr Wilkes to proceed, as in my judgment he did, without clearly worded undertakings on these matters, and assume, as he did, that because the Code for completion by post meant that undertakings had to be given, he had them already. His instructions obliged him to be satisfied that prior to or contemporaneously with the transfer of the property to Mr Patel, the GE Money mortgage would be discharged. In my judgment a reasonable solicitor acting carefully in the interest of his lender client would not be so satisfied on the information which Mr Wilkes had, and he parted with the money.”
“In the present case I do not attach blame to Mr Wilkes for believing that what he had, he had from a solicitor, but in my judgment he was too ready to act as if he had the necessary authority to part with the money. I therefore refuse to grant relief undersection 61 Trustee Act 1925 .”
“In my view, therefore, the judge was right to hold that 'completion' in clause 10.3.4 did not refer to the successive moments when the transfer and charge were respectively registered. It referred to the prior date when conventional completion occurred. [The Solicitors] were authorised by [the Bank] to release the loan money to enable such completion to take place. The trust was only destined to subsist until such time as it did.” ‘Conventional completion’ is a reference back to [39] where Rimer LJ said: “'Completion' in a typical domestic sale and purchase transaction of a property with a registered title conventionally refers to the ceremony, or the agreed postal equivalent, at which the vendor and purchaser (or their respective agents) perform the prior contract. Putting it generally, the purchaser pays money to the vendor, which the vendor applies in redeeming the prior charges and satisfying the unpaid balance of the purchase money. The vendor, in exchange, gives vacant possession of the property to the purchaser and delivers to him the transfer and certificates of discharge of the prior charges. It is this exchange of money and documents that is normally referred to as completion.”
“The purported contract was a nullity, since the Greens had not agreed to sell their property to Mr Davies, nor had they authorised anyone to sell it to him in their name; and the purported completion of that nullity by way of the exchange of purchase money for forged documents could not in my view have amounted to completion. Nothing, said Lear, will come of nothing, and so it was here. Completion in the present context must mean the completion of a genuine contract by way of an exchange of real money in payment of the balance of the purchase price for real documents that will give the purchaser the means of registering the transfer of title to the property that he has agreed to buy and to charge. An exchange of real money for worthless forgeries in purported performance of a purported contract that was a nullity is not completion at all. Had that happened in this case, the parting with the loan money would have been a breach of trust.”
“The result was that [the Solicitors] parted with the loan money in exchange for undertakings that were not of the nature they thought they were. They were themselves direct victims of the fraud and the relevant events of 4 September were in law a nullity, just as would have been an exchange of money for forged documents. Such a nullity also cannot be characterised as the completion of either the purchase or of the charge that [the Bank] instructed [the Solicitors] to obtain. It follows in my view that, as the events of 4 September did not amount to completion, [the Solicitors] had no authority from [the Bank] to release the loan money to [the impostor]. They paid it away in breach of trust for which, subject to obtaining relief under section 61, they were accountable to [the Bank].”
“…it may at first blush be thought that [the Solicitors] did suffer a degree of unfairness. That, however, is to ignore that they failed to obtain relief under section 61; and that was because the judge found that, although they had acted honestly in relation to the transaction, they had not acted reasonably in it and so were not deserving of the merciful exercise by the court of its exculpatory discretion. Their material failings were (i) to establish that Deen actually had an office in Holland Park, which constituted a breach of clause A3.2 of Section 3 (Safeguards) of the Handbook; and (ii) to part for a second time with the money in late September when they knew that [the impostor] had breached their earlier undertakings. Whilst it is impossible not to have sympathy for [the Solicitors] in becoming enmeshed in the fraud, the judge's conclusion was that, by these two shortcomings, they brought their misfortune upon themselves. If they had instead performed their role as solicitors with exemplary professional care and efficiency, but had still parted with the loan money in circumstances that were objectively reasonable, the decision on the section 61 application might have been different.”
“I see no reason to give any of these cases, all of them in this court, any prominence over any other. They all turn on their own particular facts. They nevertheless allow the following conclusions: (1) that the default obligation is one limited to the taking and exercise of reasonable care; (2) that it requires special facts or clear language to impose an obligation stricter than that of reasonable care; (3) that a professional man will not readily be supposed to undertake to achieve a guaranteed result; and (4) that if he is undertaking with care that which he was retained or instructed to do, he will not readily be found to have nevertheless warranted to be responsible for a misfortune caused by the fraud of another. It follows from the jurisprudence and from these conclusions to be derived from them, however, that it is not possible to support a blanket approach whereby, even in the absence of an express warranty, a professional's responsibility is nevertheless always limited to the taking of reasonable care.”
“It was insufficient for Mr Wilkes to proceed, as in my judgment he did, without clearly worded undertakings on these matters, and assume, as he did, that because the Code for completion by post meant that undertakings had to be given, he had them already.”
“such a reply [to a requisition on title] may also amount to an undertaking”
“What were Davisons obliged to achieve? In the present case, the Claimant argued that an unqualified obligation is one which, in the manner in which it is expressed, does not depend on the exercise of care and skill by the solicitor. A detailed perusal of the CML Lenders’ Handbook (which I need not repeat) shows that some duties are expressed in mandatory terms and others in terms which are not. There was a clear mandatory requirement at Paragraph 5.8 of the CML Lenders’ Handbook and incorporated in to the retainer that Nationwide were to have a fully enforceable first legal charge on completion and the pre-existing charge had to be redeemed.”
“In the present case, Nationwide did not obtain a registered first legal charge or any charge on the Avery Road property, and did not get what they bargained for when they retained Davisons. Davisons were in breach of the terms of their retainer.”
“Obligations of this nature are not likely to be of an absolute nature. They are better suited to a requirement to exercise a reasonable standard of care. The words do not compel the conclusion for which the bank contends.”
“The letter was a retainer by the bank of a firm of solicitors to perform professional services of an advisory and ministerial kind for the bank. Professional services provided by the solicitors would not normally involve the guaranteeing of a result by them, such as verifying the identity of Mrs Dukes, let alone providing the bank with what would amount to an insurance policy against the risk of fraud occurring in a transaction entered into by the bank with its customer Mr Dukes; a transaction about which the solicitors were told little by the bank and in which they had no input or influence.”
“Whether a professional person has undertaken an unqualified obligation of any kind in any given case will depend on the terms of the contract under which he has agreed to provide his services. However, cases such as Greaves & Co. (Contractors) Ltd v Baynham Meikle & Partners and Midland Bank v Cox McQueen demonstrate that the very nature of the obligation on which the client relies may itself make it more or less likely that it was intended to be qualified or unqualified, as the case may be. I am not sure that it is helpful in a case such as the present to ask whether the professional person gave a promise to answer for the fraud of a third party (where that is the origin of the eventual loss), since in most cases neither party will have had that particular risk in mind. In my view it is better to ask whether, having regard to the facts and matters known to both parties when the instructions were accepted, the professional person assumed an unqualified obligation in relation to the particular matter in question. It does not follow, as was suggested in Midland Bank v Cox McQueen that, because the solicitors could not have assumed an absolute obligation to obtain Mrs. Dukes's signature in all eventualities, their duty was simply to exercise reasonable skill and care. They could still have undertaken an unqualified obligation to ensure that the person to whom they explained the significance of the documents and whose signature they obtained (if they obtained one at all) was the real Mrs. Dukes, as the solicitors in Zwebner v The Mortgage Corporation in effect did. Finally, I think these authorities support the conclusion that, although the court should be cautious about holding that a professional person has undertaken an unqualified obligation in the absence of clear words to that effect, there is no reason not to give effect to the language of the contract where it is clear.”
“…to ensure that the Court of Appeal has at its disposal an adequate appraisal of practices recommended by the Law Society aimed at achieving satisfactory completion and the safe transfer of funds held on behalf of lenders. It is also keen to help the court to gain an understanding of the practical implications of a ruling either to uphold or overturn the High Court’s decision.”
“It is on the question of what constitutes an appropriate undertaking that the Law Society asks for the Court’s permission to intervene.”