England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (GRAY J)

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 27th July 2001

LORD JUSTICE ROBERT WALKER:

The appeal

1. This is the judgment of the court, to which we have all contributed, on an appeal from an order of Gray J made in the Queen's Bench Division on 19 July 2000. The judge's order determined two issues which had been directed to be tried in an action for solicitor's negligence brought by Mr Takorbhai Patel and his wife Mrs Devyani Patel against a firm of solicitors, Daybells. The issues were:

i) liability (excluding any question of whether any breach of duty established by Mr and Mrs Patel caused them any recoverable loss or damage); and

ii) whether Mr and Mrs Patel had, as a matter of law, suffered no recoverable loss because the Midland Bank charge (mentioned below) was redeemed before the commencement of the action.

2. The judge decided the first issue against Mr and Mrs Patel. That was enough to dispose of their claim but the judge went on to consider the second issue, in case the matter went further. On the second issue his ruling was in favour of Mr and Mrs Patel. His judgment is reported at [2000] LLR (PN) 844. Mr and Mrs Patel have appealed and Daybells have cross-appealed, in each case with the permission of the judge. This judgment relates only to the appeal on the first issue.

The facts

3. The primary facts are largely common ground, although there is lively controversy as to their legal implications. The summary which follows is based on the judge's findings of fact, none of which has been challenged in this court.
4. Mr and Mrs Patel were the only directors and shareholders of a company named Voltland Ltd ("Voltland"). At the end of 1988 Mr Patel, who seems to have been the more active director, became interested in acquiring (through Voltland) a sports ground and pavilion known as the Ladbourne Sports Club ("the Ladbourne premises") at Blackheath Park, London SE12. At that time the Ladbourne premises (which were held under three registered freehold titles) belonged in equity to a company called Acrebond Ltd ("Acrebond"). It appears (although the judge did not make detailed findings about this) that Acrebond had only recently purchased the Ladbourne premises with the help of a mortgage from Midland Bank plc. This mortgage was dated 25 November 1988 but it was not registered at the Land Registry for some time since Acrebond's title also remained unregistered (a letter dated 28 February 1989 from its solicitors suggests that this was because Acrebond was hoping for a quick subsale).
5. Voltland was hoping to fund the purchase of the Ladbourne premises by the sale of other club premises which it owned, that is the Uppercut Club at Forest Gate, London E7. Those premises proved hard to sell. Nevertheless in January 1989 Mr Patel on behalf of Voltland agreed, subject to exchange of contracts, to buy the Ladbourne premises for £605,000. The solicitors instructed on behalf of Voltland were Daybells of Stratford E15, and that firm also acted for Mr and Mrs Patel personally when they subsequently became involved as guarantors. The partner in Daybells who acted for them was Mr Charles Wright. He was the senior partner and an experienced conveyancer.
6. The solicitor acting for Acrebond was Mr John Shaw, who practised as a sole practitioner in Coventry Street, London W1 under the style of Shaw & Co. He had been admitted as a solicitor in 1980. He was subsequently struck off the roll of solicitors for breaches of his professional duty which were serious but not dishonest, and were not associated with this case.
7. Despite Voltland's continuing difficulties in selling the Uppercut Club, on 27 February 1989 it exchanged contracts for the purchase of the Ladbourne premises. On 1 March 1989 Mr Wright of Daybells sent requisitions on title to Mr Shaw. The fifth requisition was:

"Where will completion take place? We would like to complete by post. If you agree please confirm that you will adopt the Law Society's Code for completion by post. We confirm that we will adopt the code."

This was answered, "At our offices".

8. The sixth requisition was:

"We propose to remit the balance of the purchase money by bank transfer. If this is acceptable please give the following information, name and address of your bank …".

This was answered, "Midland Bank plc, Holborn Circus Area Branch" (with the address). The tenth requisition was:

"Please confirm that all subsisting mortgages will be discharged on or before completion or that a written undertaking in the Law Society's recommended form will be handed over".

This was answered, "Confirmed – the undertaking will be given in respect of the charge in favour of Midland Bank plc".

9. The completion date specified in the contract was 14 March 1989. Voltland was unable to raise the funds to enable it to complete on that date. On 20 March Acrebond served notice to complete but Mr Wright seems to have had some success in playing for time. In particular, he relied on s.110(5) of the Land Registration Act 1925 to require that Acrebond should be registered as the proprietor of the premises. That registration (and the registration of the Midland Bank's charge) was effected at the Land Registry on 13 April 1989.
10. However (as the judge said) Acrebond was losing patience. On 20 April it required Voltland to vacate the premises, which Voltland had been permitted to enter in order to carry out building work. Acrebond also claimed to have rescinded the contract, although this was disputed.
11. Those were the circumstances in which, in the second half of June 1989, Mr Patel renewed an approach to Bank of Credit and Commerce International SA ("BCCI") as a source of finance. By then Acrebond had served a second notice to complete which was to expire at 2.15pm on 30 June 1989. It was not until 27 June that Mr Patel informed Mr Wright that BCCI was in principle willing to make a bridging loan to Voltland. The terms were set out in a letter which was faxed to Mr Wright on 28 June. BCCI offered to advance £1m for four months only, at three per cent over its base rate. £350,000 was to be used to pay off the whole of Voltland's overdraft at Barclays Bank, Potters Bar. £605,000 was to be used for the purchase of the Ladbourne premises and the balance was to be used for the costs of their acquisition and refurbishment. The security was to be a first legal charge on the Uppercut Club (then charged to Barclays), a first legal charge on the Ladbourne premises, and an unlimited personal guarantee from Mr and Mrs Patel.
12. On 29 June Mr Wright by courier sent a bundle of documents (some original, some copies and some drafts) to BCCI at its head office at 101 Leadenhall Street, London EC3. Later he was told by telephone that the loan was "more or less approved". On the morning of 30 June (the final completion date) he went to BCCI's offices to assist its legal department with the paperwork. To his surprise, he was asked to act for BCCI in the transaction (with his fees to be paid by Voltland). He agreed to do so and completed a report on title then and there. He also wrote out a letter addressed to BCCI, written by his firm on behalf of Voltland, asking BCCI to transfer £605,000 to Shaw & Co at the Midland Bank, Holborn and £350,000 to Barclays Bank, Potters Bar. In this way completion was achieved by the 2.15pm deadline, but only by the narrowest possible margin.
13. Mr Wright's evidence was that in completing on behalf of Voltland he was relying on Mr Shaw's undertaking to discharge the Midland Bank mortgage and provide a Form 53 evidencing the discharge. This was the undertaking in the Law Society's recommended form which was referred to in the tenth requisition and was confirmed by Mr Shaw. Form 53 is a simple form, very familiar in registered conveyancing, by which the proprietor of a registered charge acknowledges that the charge has been discharged. After completion the purchaser's solicitor will submit it to the Land Registry together with the vendor's stamped transfer in order to obtain the necessary alterations in the proprietorship register and the charges register. Mr Shaw wrote to Mr Wright on 3 July enclosing Acrebond's transfer and other documents. He stated in his letter,

"We confirm that we have remitted sufficient funds to the Midland Bank in order to discharge the borrowings against the property and will let you have the Form 53 discharge of registered charge as soon as we have received this from the bank."

14. However Midland Bank did not provide the Form 53 as Mr Shaw expected. Its charge on the Ladbourne premises was not finally discharged until May 1993, in consequence of proceedings taken by BCCI against Daybells, in which Mr Shaw was joined as a third party. The payment was made by Mr Shaw's professional indemnity insurers. By then Voltland was in compulsory liquidation.
15. The background to Midland Bank's failure to provide the Form 53 appears from Mr Shaw's witness statement, which was not in this respect challenged in cross-examination (apparently because it was not thought to go to liability). This involves going some way back into the history of the matter. Mr Shaw employed one fee-earner, a law clerk named Mr John di Stefano, who dealt with the litigation side of the practice. Mr di Stefano had a financial interest in Acrebond, which was controlled by Mr Ashok Kumar and had been Mr Shaw's client since 1984. In relation to conveyancing transactions on behalf of Acrebond Mr di Stefano was not professionally involved, but was in the position of a client. It was probably no coincidence that Acrebond had accounts at the Holborn Circus branch of Midland Bank, which was where Mr Shaw held his clients' account.
16. On 3 March 1989 Mr Evans of Midland Bank, Holborn Circus wrote to Mr Shaw informing him, in reply to his query, that the amount required to redeem the mortgage was £277,227.50. That figure was for the balance due on a loan account and it was updated more than once and eventually reached a little over £290,000. In addition, however, Acrebond owed a further sum of about £260,000 on an overdraft at the same branch. Since the charge on the Ladbourne premises was an "all moneys" charge the overdraft also was secured on the premises, although it seems that it was only on or about 26 June 1989 that Mr Evans made that clear to Mr Shaw. The practical effect was that Midland Bank required Acrebond to pay a much larger sum than any that had been quoted as necessary for the redemption of the loan account charged on the Ladbourne premises. On 3 July 1989 Mr Shaw authorised Midland Bank to transfer a total sum of a little over £320,000 (that is the latest quoted sum plus £30,000, which was what Mr Shaw thought Mr Evans was requiring) and on the same day he transferred the balance, less fees, to another account which Acrebond had at Allied Irish Bank.
17. On 4 July, after the balance of the money had gone out of the client's account, Mr Evans told Mr Shaw on the telephone that the bank was still £95,000 short of security and that that amount must be paid off. On 9 August Mr Shaw sent another £40,000 to Midland Bank on the instructions of Mr di Stefano (and apparently from funds provided by Mr di Stefano's wife). But the bank still refused to provide the Form 53.
18. Litigation followed: first in June 1990 BCCI's action against Daybells, and then in June 1995 the action by Mr and Mrs Patel (to which Mr Shaw was joined as a Part 20 defendant). By then the property market had suffered a very severe fall; the Ladbourne premises were sold by BCCI in October 1994 for £200,000. On 27 March 2000 there was an order by consent for the trial of two issues already mentioned.

The judgment under appeal

19. The judge heard oral evidence from Mr and Mrs Patel on their behalf and from three current or former solicitors – Mr Wright, Mr Shaw and Mr Nigel Coates (who was called as an expert witness) – on behalf of Daybells. As the judge said, the facts were largely agreed at the hearing. The judge did not comment adversely on any of the witnesses. The witness statements of Mr Patel and Mr Wright conflicted on some issues (for instance, as to whether Mr Patel and Mr Kumar of Acrebond were close business associates) but those issues were not explored in cross-examination. The oral evidence of Mr and Mrs Patel and Mr Shaw was quite brief.
20. In his judgment the judge, after summarising the facts, turned at once to one issue of fact which he thought he should resolve (although in the end he did not regard it as determinative). That issue was whether Mr Wright and Mr Shaw agreed on behalf of their respective clients to adopt the Law Society's Code for Completion by Post ("the code") in the 1984 version then current. This turned on Mr Shaw's delphic reply to Mr Wright's fifth requisition and on any subsequent oral agreement between them.
21. The relevant provisions of the code in force at that time are set out in the judge's judgment:

"1. Adoption hereof must be specifically agreed by all the solicitors concerned and preferably in writing …

3. The vendor's solicitor undertakes that on completion, he:

(1) will have the vendor's authority to receive the purchase money; and

(2) will be the duly authorised agent of the proprietor of any charge upon the property to receive part of the money paid to him which is needed to discharge such charge.

4. The purchaser's solicitor shall send to the vendor's solicitor instructions as to:

(1) documents to be examined and marked;

(2) memoranda to be endorsed;

(3) deeds, documents, undertakings and authorities relating to rents, deposits, keys etc and

(4) any other relevant matters …

7. Once completion has taken place the vendor's solicitor shall as soon as possible thereafter on the same day confirm the fact to the purchaser's solicitor by telephone or telex and shall also as soon as possible send by first class post or document exchange written confirmation to the purchaser's solicitor, together with the enclosures referred to in para 4 hereof. The vendor's solicitor shall ensure that such title deeds and any other items are correctly committed to the post or document exchange. Thereafter they are at the risk of the purchaser's solicitor."

22. The judge did not treat the reply to the fifth requisition as a specific adoption of the code. Both Mr Wright and Mr Shaw gave evidence that they had orally agreed (or in Mr Shaw's case "must have agreed") to adopt the code but neither had an attendance note or other means of pinning down the occasion. The judge found that this did not amount to a specific adoption either. Mr Michael Briggs QC (who appeared in this court, but not below, for Daybells) made clear that he was not challenging that finding.
23. The judge did not quote any of the notes to the 1984 version of the code but it is clear from note 4 that clause 3(2) was introduced because of the decision of the Privy Council in Edward Wong Finance Co v Johnson, Stokes & Master [1984] AC 296 (in which the Privy Council gave judgment on 7 November 1983). That decision has been the focus of the argument both before the judge and in this court.
24. The structure of the judgment on the first issue was that after summarising the undisputed facts and making his finding about the code, the judge referred to some well-known authorities, and in particular the decision of the Privy Council in Wong, which he discussed at some length. That case is discussed in more detail below. In brief, it was concerned with a so-called Hong Kong style completion, a standard procedure by which sales of land in Hong Kong were completed on the strength of a solicitor's undertaking. A commercial lender had lost its money and its security through the fraud of the vendor's solicitor, who had given an undertaking and then absconded with the funds. Lord Brightman, delivering the opinion of the Privy Council, stated ([1984] AC at p.306)

"As already indicated, the prevalence of the Hong Kong style of completion is established beyond a peradventure. It is peculiarly well adapted to the conditions in Hong Kong. It has obvious advantages to both solicitors and their clients. Their Lordships intend to say nothing to discourage its continuance. However, in assessing whether the Respondents fell short of the standard of care which they owed towards the Appellants, three questions must be considered: First, does the practice, as operated by the Respondents in the present case, involve a foreseeable risk? If so, could that risk have been avoided? If so, were the Respondents negligent in failing to take avoiding action?"

25. The judge cited that and other passages from Wong. He then referred to some criticisms of Wong made by Mr Michael Gadd (who below appeared on his own for Daybells). Then in paragraph 37 of his own judgment he reached a sort of staging post towards a conclusion:

"I see considerable force in the criticisms which Mr Gadd has advanced of the Wong case. Whilst technically I am not bound by that decision, I nevertheless feel myself constrained to accept the principle there laid down, namely that, other things being equal, it is or may be a breach of duty for a solicitor acting for a purchaser to complete on the basis of an undertaking by the vendor's solicitor to discharge an outstanding mortgage on the property to be transferred. I express myself in that way because I hesitate to arrive at a conclusion that a conveyancing practice which, on the unchallenged evidence before me, is widespread, convenient and efficacious, is nonetheless one which it is negligent for a solicitor to follow. But plainly Wong is a powerful, albeit only persuasive authority and it was approved expressly in Bolitho and impliedly in National Home Loans Corporation Plc v Kaufmann. "

Bolitho is a reference to the decision of the House of Lords in Bolitho v City and Hackney Health Authority [1998] AC 232. National Home Loans Corporation v Kaufmann is an unreported decision of this court on 21 June 1995 refusing permission for an appeal from the Brighton County Court. It will be necessary to come back to both those cases as well as to Wong.

26. Referring back to the three questions posed by Lord Brightman, the judge said that the first (the existence of foreseeable risk) must be answered in favour of Mr and Mrs Patel. But in answering the second (whether the risk could have been avoided) it was, he said, necessary to take into account the circumstances of the particular case. Mr Roger Smith (who appeared below, as in this court, for Mr and Mrs Patel) had relied on three particular factors, listed in paragraph 40 of the judgment: the fact that Mr Wright did not know the amount due to Midland Bank; the fact that Mr Shaw was a sole practitioner; and the fact that the BCCI loan was only a four-month bridging loan.
27. The judge concluded that none of these factors was material in assessing the scope of the duty which Mr Wright owed to this clients. The judge then went on (in paragraphs 45 to 49 of his judgment) to ask himself whether there were any other circumstances which bore on whether or not Mr Wright was negligent to transfer the purchase price to Mr Shaw on the strength of his undertaking.
28. The first matter that he considered was the long delay between exchange of contracts (27 February 1989) and completion (30 June 1989), with Acrebond's overdraft likely to fluctuate in the meantime, and Voltland not being in funds until an hour or so before the deadline for completion. He regarded these circumstances as significant:

"It appears to me to be unrealistic to stigmatise Mr Wright as guilty of breach of the duty of care owed by him to his clients because, with the completion deadline approaching, the amount required to obtain the discharge of the Midland Bank charge unknown and the BCCI loan still in the course of preparation, he failed to set in train the arrangements necessary for two banker's drafts to be prepared. Time simply did not permit this to be done. Mr Wright had to bear in mind the risk that his clients would forfeit their deposit if the completion deadline was not met."

29. The judge rejected (because it had not been pleaded) the argument that Mr Wright should have warned his clients of the risk. He was satisfied that Mr Wright knew that they would have been anxious to press on regardless. He also rejected an argument (which had been pleaded, although only by a late amendment) that Mr Wright was at fault in not obtaining confirmation direct from Midland Bank of the amount of its charge and of Mr Shaw's authority to receive that sum on behalf of the bank. He accepted the evidence of Mr Coates that that would not be normal practice (in paragraph 49 the penultimate reference to Mr Shaw is an obvious slip for Mr Wright). He did not need to deal with the argument (which had been deleted from the statement of claim by amendment) that Mr Wright was at fault in failing to advise Mr and Mrs Patel as to the possible remedies open to them and Voltland. For these reasons the judge determined the first issue in favour of Daybells.

Edward Wong Finance Co v Johnson Stokes & Master

30. We have already given a brief summary of Wong but it is of central importance to the appeal and it calls for fuller treatment. The appellant company ("Wong Finance") was a commercial lender and agreed to lend $1.355m to a manufacturing company ("Po Fung"). The object of the loan was to finance the acquisition of the ground floor of a factory in Kowloon, which was to be the security for the loan. The sale was a subsale under fairly complex contractual arrangements. The events took place in December 1975 and January 1976, at a time when the solicitors' profession in Hong Kong did not have any compulsory system for indemnifying clients against loss through a solicitor's negligence or fraud (although that did not form part of the grounds of decision).
31. The respondents, a Hong Kong firm of solicitors of the highest repute, acted for Wong Finance (and, it seems, Po Fung). The vendors were represented by Mr Danny Yiu, a sole practitioner. On 27 January 1976 the respondents wrote to Mr Yiu proposing to transfer $1.355m to him on his undertaking within 10 days to complete the transaction by sending some specified documents and arranging for others to be registered at the Land Office. Mr Yiu countersigned a copy of the letter and the respondents sent Mr Yiu banker's drafts in his favour for $1.665m, including a draft for $1.355m provided by Wong Finance. Mr Yiu then had until 6 February to perform his undertaking. But before that date there were rumours, which proved to be well founded, that Mr Yiu had absconded with these and other clients' funds. Wong Finance had parted with its money without obtaining any security.
32. Wong Finance sued its solicitors and at first instance it was successful. The solicitors' appeal was allowed by a majority of the Hong Kong Court of Appeal. But Wong Finance's further appeal was allowed by the Privy Council. There was unchallenged evidence that in Hong Kong conveyancing transactions were almost invariably completed (in the words of Penlington J at first instance)

" … not in accordance with the traditional way of an actual exchange of money for documents but by one solicitor forwarding cash against another solicitor's undertaking to produce, within a reasonable time, registerable documents of title."

We note that an undertaking in those terms is more extensive, and may be more open to controversy, than a simple undertaking to discharge the mortgage and to produce Form 53, which is a single simple document.

33. We have already set out the three questions which Lord Brightman posed ([1984] AC at p.306). He gave a clear answer to the first:

"In the opinion of their Lordships, the risk of loss to the appellants by placing the money at the disposition of the vendors' solicitor unquestionably involved a foreseeable risk. Such a risk is usually remote, but is none the less foreseeable."

Moreover the risk had been foreseen by the Law Society of Hong Kong, whose conveyancing subcommittee had in 1965 reported that the practice involved some degree of risk and was "one of courtesy and convenience only".

34. The Privy Council also considered that the risk could readily be avoided by simple steps which would not undermine the basis of the Hong Kong style of completion. Earlier in the judgment (at p.303) Lord Brightman had set out what he saw as the normal English procedure:

"The normal method of completing a contract for the sale of land in England is for the purchaser's solicitor to deliver to the vendor's solicitor a draft for the balance of the purchase money in exchange for an executed grant of the land or interest in land contracted to be sold; if the property is subject to a mortgage, the mortgagee will either be a party to the grant and receive the whole or part of the purchase money by way of redemption; or he will execute a separate release of his charge in return for the redemption money; if the property purchased is to be financed by a new mortgage, the loan will be made against delivery of the executed grant and instrument of charge. In other words, the payment of money and perfection of title are simultaneous transactions."

The solution proposed by Lord Brightman (at pp.307-8), in the case of the sale of land subject to a mortgage which was to be discharged, was for a separate banker's draft to be provided to the mortgagee or his duly authorised agent.

35. Mr Smith has submitted that the Privy Council's decision, although not strictly binding on this court, is of strong persuasive authority. He has also submitted that it has been approved by the English court on three occasions, one being approval by the House of Lords. It is convenient to deal with that submission at once.
36. In Bolitho v City and Hackney Health Authority [1998] AC 232 the House of Lords held that a medical man did not necessarily escape liability for negligent treatment or diagnosis merely because the evidence showed that a number of medical experts genuinely held the opinion that his treatment or diagnosis accorded with sound medical practice. It must also be shown that that opinion has a logical basis. Lord Browne-Wilkinson (with whom all their lordships agreed) said at p.242:

"In particular in cases involving, as they so often do, the weighing of risks against benefits, the judge before accepting a body of opinion as being responsible, reasonable or respectable, will need to be satisfied that, in forming their views, the experts have directed their minds to the question of comparative risks and benefits and have reached a defensible conclusion on the matter."

37. That is the context in which Lord Browne-Wilkinson referred to Wong as illustrating the general principle (p.242):

"The Privy Council held that even though completion in Hong Kong style was almost universally adopted in Hong Kong and was therefore in accordance with a body of professional opinion there, the defendant's solicitors were liable for negligence because there was an obvious risk which could have been guarded against. Thus, the body of professional opinion, though almost universally held, was not reasonable or responsible."

The House of Lords did not comment on the technical issues of conveyancing raised by Wong, and as Bolitho was a medical negligence case it would have been most surprising if they had done so.

38. National Home Loans Corporation v Kaufmann (21 June 1995, unreported) was a not-on-notice application for permission to appeal against a county court judge's decision, in possession proceedings, to grant an adjournment to a defaulting mortgagor in order to enable him to sue his solicitor. The mortgagor had (as is explained in the judgment of Millett LJ, with which Simon Brown LJ agreed) found himself, through no fault of his own, in the unenviable position of a man with two mortgages on the property – his own, and his vendor's, which had not been redeemed because her licensed conveyancer had absconded with the money intended to pay it off. Millett LJ referred to Wong and said,

"It is important to appreciate that the practice of accepting a solicitor's undertaking (or that of a licensed conveyancer) was not in issue in Wong, and ought not to be in issue in the proceedings which [the purchaser] brings. The loss did not occur because his solicitors accepted [the licensed conveyancer's] undertaking. It occurred because they made payment direct to him (instead of to the plaintiffs) without first obtaining the plaintiffs' authority to do so. This exposed [the purchaser] to an unnecessary risk, that of the dishonesty of his vendor's conveyancer."

39. Mr Briggs has referred to the recent practice direction on the citation of authorities ([2001] 1 WLR 1001) and has pointed out that Kaufmann is (for three separate reasons) within the category of cases which may not normally be cited. However it was referred to by the judge in his judgment, which has now been reported. We think it would be unrealistic simply to ignore it. Observations of Millett LJ invite interest and respect, not least (in this case) because it was his argument as leading counsel that prevailed in Wong. But we cannot regard the case as a binding decision of this court as to the correctness of Wong, or as to its application in present-day English conveyancing.
40. The third case which Mr Smith referred to was the decision of this court in Arbiter Group v Gill Jennings & Every [2000] PNLR 680, a decision about the delegation of duties (which was held not to be negligent) by a firm of patent attorneys. Swinton Thomas LJ (with whom Waller LJ and Arden J agreed) at pp.687-9 referred to Wong without any criticism but described it as a very different case (especially as it did not involve delegation of a task to a third party).
41. We do not think that these authorities take the matter very far. We would unhesitatingly accept the general principle in Wong, as restated in the context of clinical negligence in Bolitho, that conformity to a common (or even universal) professional practice is not an automatic defence against liability; the practice must be demonstrably reasonable and responsible if it is to give protection. But at a lower level of abstraction these recent authorities do not tell us whether the Privy Council's views about conveyancing in Hong Kong 25 years ago are directly applicable to conveyancing in England twelve years ago.

Conveyancing practice

42. Indeed, Mr Gadd's submission to the judge, which Mr Briggs repeated in this court, was that Lord Brightman's description (in 1983) of current English conveyancing practice was already somewhat out of date. Huge changes in conveyancing practice took place in the second half of the last century, and it is difficult (except, perhaps, after prolonged research through successive editions of standard practitioners' textbooks, and other more ephemeral publications) to chart the process of change.
43. The largest single cause of changing practices has been the gradual preponderance of registered over unregistered transactions. This has now made almost obsolete the procedures under which a managing clerk or an articled clerk acting for a purchaser might spend half a day at the office of the vendor's solicitors examining original title deeds (some, possibly, in manuscript) against the abstract of title, and ensuring that the necessary memoranda were inscribed on deeds which (because they related to other land as well) were not to be handed over on completion. It is however a necessary concomitant of registration of title (until the dawn of electronic registered conveyancing, which may not be far off) that no transaction can be truly complete until it has been perfected by registration at the Land Registry. The evidence in this case shows that in the unhealthily overheated market of 1989 there were long delays in the process of registration. There have been other relevant changes of various sorts, including the introduction of secure and reliable electronic transfers of money, and the strengthening of arrangements (supervised by the Law Society) for the protection of solicitors' clients.
44. In this case the judge had the benefit of expert evidence in the form of the written report and oral evidence of Mr Coates, who had been articled in 1979 and had been admitted as a solicitor in 1981. He had been head of his firm's residential conveyancing department since 1986 and also had experience of commercial transactions. His evidence was largely directed (as was correct: see the observations of Oliver J in Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384, 402) to what the standard practices were.
45. Some of Mr Coates' evidence did not fit easily with Lord Brightman's description of the practice in England. Completion by post was quite usual in the 1970's. In addition, in answer to some questions from the judge the witness indicated that even at an old-style completion (by which he meant a completion meeting at the office of the vendor's solicitor attended by the purchaser's solicitor) an undertaking to discharge an existing mortgage would be offered and accepted as a matter of routine:

" … the old-style completion used to take place by hand with a written undertaking to discharge the mortgage being handed over with the title deeds. So, you would arrive with your banker's draft and receive the title deeds and the written undertaking to discharge the mortgage. I can only speak back to 1979 when I started doing conveyancing work, but I don't think … It is very rare for there to be what I might describe as a three party completion where the mortgagee's solicitors arrive … "

46. Mr Coates identified two situations in which it would not be normal, and would not be advisable, to accept a solicitor's undertaking to discharge a mortgage. One was if the mortgage lender was not an established financial institution (by which he meant a member of the Council of Mortgage Lenders). The other was if the transaction was so large that the sum required to honour the undertaking might exceed the minimum level of solicitors' indemnity cover (which was £500,000 at the time of exchange of contracts and completion, and was doubled in September 1989). Mr Coates attached importance to the existence of the Solicitors' Indemnity Fund and the Compensation Fund as a means of ensuring that a solicitor's undertaking provides full protection. We will return to some other aspects of the evidence of Mr Coates.

Submissions in this court

47. Mr Smith put the decision of the Privy Council in Wong in the forefront of his case. He submitted that the risk of loss through non-performance of a solicitor's undertaking (whether because of fraud or, as here, some other misadventure) was, in Lord Brightman's words, remote but none the less foreseeable. He put forward the general proposition that it was in all circumstances a breach of duty for a purchaser's solicitor to complete on the strength of the vendor's solicitor's undertaking to discharge a mortgage, unless the purchaser's solicitor took further precautions. He said, echoing Lord Browne-Wilkinson in Bolitho, that such a practice, even if almost universal, failed to provide a defence because it was not a reasonable and responsible practice.
48. Mr Smith submitted that the 1984 version of the code did not improve the position of the purchaser's solicitor, since it merely added to the inadequate protection afforded by one solicitor's undertaking (that he would obtain the discharge of a mortgage) the similarly inadequate protection afforded by a second undertaking (that he would be the duly authorised agent of the chargee to receive part of the purchase money). That criticism of the code was made at the time (for instance the 2^nd cumulative supplement, p.xxix to the 18^th edition of Emmet on Title, which was put to Mr Coates in cross-examination). Mr Briggs tacitly accepted that there was some force in this criticism when he made clear that he was not challenging the judge's conclusion that Mr Wright and Mr Shaw did not adopt the code.
49. Mr Smith further submitted that, although he was relying on the general principles which he derived from Wong, he was also relying on particular features of this case, especially the fact that Mr Shaw was a sole practitioner and that the loan from BCCI was only a four-month bridging facility. The judge had rejected these points both because he accepted the evidence of Mr Coates and for a broader reason derived from the SAAMCO case (South Australia Asset Management Corporation v York Montague [1997] AC 191; the judge relied especially on Lord Hoffmann's reference at p.213 to the Empire Jamaica [1955] p.259, the case about the uncertificated second mate.) The reference to the SAAMCO case led to some inconclusive debate in this court as to what the case really decided (Lord Hoffmann's answer can be found in Nykredit Mortgage Bank v Edward Erdman Group [1997] 1 WLR 1627, 1638) and as to the drafting of the issues set out in the consent order. We do not think we need go further into that debate.
50. Mr Smith referred to practical difficulties which were said to attend the "split drafts" solution to the problem. He said that these alleged difficulties were much exaggerated. The answer, he said, was for the purchaser's solicitor to approach the chargee direct, in good time before completion, and obtain a firm figure for redemption of the charge, and the chargee's authority for the vendor's solicitor to receive that sum. As to the facts of this case, he said that it was a fundamental misconception to suppose that Mr Wright had to leave everything until the last moment. He was also critical of the judge's acceptance that it would have been pointless for Mr Wright to issue a warning to his clients because he knew that they "would have been anxious to press on regardless".
51. At the beginning of his oral argument Mr Briggs put before the court four contending positions: (i) that reliance on a solicitor's undertaking to discharge a mortgage is normally (that is, apart from exceptional situations) a proper (that is, not a negligent) course and that this was not an exceptional case; (ii) that reliance on an undertaking was proper (that is, was not negligent) on the particular facts of this case; (iii) that reliance was negligent, but only because of the particular facts of this case; and (iv) that reliance on an undertaking was negligent in any case. Positions (i) and (ii) represented Mr Briggs' primary case and his fall-back position respectively; (iii) and (iv) represented Mr Smith's fall-back position and his primary case respectively. That is an accurate summary of the competing arguments in this court.
52. As examples of exceptional situations where an undertaking should not be accepted, Mr Briggs mentioned the two instances referred to in the evidence of Mr Coates: the case where the transaction was so big that it might exceed the other solicitor's insurance cover, and the case of the non-institutional lender. Apart from those situations, he submitted that the use of an undertaking was not merely acceptable but essential for oiling the wheels of conveyancing, and positively advantageous to the client in keeping the purchaser clear of any disputes or delays associated with the state of the account as between mortgagor and mortgagee.
53. In enlarging on the advantages to the client Mr Briggs distanced himself from Lord Brightman's references in Wong to the practice depending on trust, and being a matter "of courtesy and convenience only" as between solicitors. He said that although English solicitors do almost invariably honour their undertakings, the practice did not ultimately depend on trust, but on the possibility of rapid summary enforcement of a broken undertaking, backed by the Solicitors' Indemnity Fund or (in practice only in the case of a dishonest sole practitioner) the Compensation Fund. He referred to Fox v Bannister (1986) [1988] 1 QB 925n and Udall v Capri Lighting [1988] 1 QB 907 as illustrating the procedure. We will come back to the question of why in this case there was no summary application against Mr Shaw by Mr and Mrs Patel.
54. Mr Briggs also urged on the court that institutional mortgage lenders are in a strong position. They have standard procedures designed for the protection of their security, and no incentive or inclination to change their ways if that might prejudice their security. They are not in the habit of issuing discharges in the shape of Form 53 unless they have cash in hand. They are not in the habit of disclosing confidential information about the state of a borrower's account to a third party. Even if authorised to do so by the borrower, a mortgage lender would be most unlikely to bind itself unconditionally to a particular redemption figure at a future date, even if that date was in the near future. (In this case the attitude adopted by Midland Bank, Holborn Circus over Acrebond's loan account and overdraft illustrates that point.)
55. Mr Briggs drew attention to annex 24N to the Law Society's Guide to the Professional Conduct of Solicitors 1993, which sets out advice from the Council of Mortgage Lenders, representing banks, building societies and other lending institutions. Under the heading 'Solicitors' undertakings' the statement says:

"The solicitor acting for the seller will need, on completion, to satisfy the buyer's solicitor that the mortgage on the property being sold has been or will be discharged. In theory the buyer's solicitor will wish to see the mortgage discharged before the purchase money is paid. However, where the monies to repay the mortgage are being provided wholly or partly by the proceeds of sale, then the mortgage cannot be paid off until after completion.

Most lenders will not seal the discharge (this expression to include sealing the vacating receipt on a mortgage deed or sealing of form 53) until they receive the redemption money. This leaves the buyer's solicitor with a problem in that he or she has to be satisfied that the mortgage will be discharged and that he or she will obtain the receipted mortgage or Land Registry form 53. This problem is solved by the use of the solicitor's undertaking.

On completion, the seller's/lender's solicitor will provide the buyer's solicitor with a written undertaking to redeem the mortgage(s) in a form recommended by the Law Society similar to that set out below:

'In consideration of your today completing the purchase of …. we hereby undertake forthwith to pay over to ….. [the lender] the money required to redeem the mortgage/legal charge dated ……. and to forward the receipted mortgage/legal charge [form 53] to you as soon as it is received by us from ….. [the lender].' "

56. The statement then describes problems which can arise with redemption statements which are, for any of a variety of reasons, incorrect. It then continues under the heading 'The CML view':

"Many of the difficulties described above would be reduced if, as a matter of course, solicitors gave lenders correct information about the borrower, the property, the account number(s), etc, and lenders, in turn, operated internal cross-checking systems and provided accurate and complete redemption statements showing clearly the last payment to be taken into account and, systems permitting, details of all the borrower's accounts relating to the property which represent mortgages to be discharged.

If the solicitor, relying on an incorrect redemption statement provided by the lender, sends insufficient money to redeem a mortgage, the lender should discharge the mortgage. (However, the lender might wish to make it clear that the release was not intended to discharge the borrower from his or her outstanding personal liability. This might prevent the borrower from successfully claiming estoppel against the lender.)

Such cases do not occur frequently; when they do, it is generally because of a clerical or administrative error on the part of the lender, such as by omitting one month's interest or an insurance premium, and the amount is usually small. Nevertheless, where it appears that there has been an error, the solicitor should immediately draw this to the lender's notice and should pursue his or her borrower client actively for any shortfall.

Very rare cases could arise where general guidance of this kind is inapplicable, for example, if there is such a major discrepancy in the redemption figure that the borrower, and, perhaps, his or her solicitor, could not reasonably have believed in the accuracy of the statement."

57. Then, under the heading 'Conclusion', comes:

"Where there is an incorrect redemption statement, which is clearly due to an error by the lender or lack of clarification, it is unreasonable that a solicitor should be put in breach of his or her undertaking. The undertaking given to the buyer's solicitor is a vital part of the conveyancing process. It is the CML's view, in such cases, that the lender should seal the discharge.

The Law Society and the Council for Licensed Conveyancers agree with the views expressed in these paragraphs. It is hoped that some of the practical measures referred to above will be implemented to avoid difficulties on redemption."

Conclusions

58. Lord Brightman was not wholly correct in the description which he gave in 1983 of standard conveyancing practice in England at that time. Postal completions had been common since the late 1970's, and even when the solicitors for the vendor and the purchaser met face to face at completion, an undertaking to discharge an outstanding mortgage was commonly offered and accepted. Moreover the situation in Hong Kong as it appears from Wong differed from England in three important respects: the undertaking was in a wider form (extending not just to the discharge of a bank mortgage but to all the deeds and documents required on completion); there was no official indemnity scheme in place; and the Law Society of Hong Kong had already warned its members of the risk.
59. Nevertheless Wong establishes or illustrates an important general principle in the law of professional negligence, confirmed by the House of Lords in Bolitho. If a practice in the profession exposes clients or patients to a foreseeable and avoidable risk, the practice may not be capable of being defended on rational grounds, and in those circumstances the fact that it is commonly (or even almost universally) followed will not exclude liability for negligence.
60. In the course of argument it was common ground that there would always be some unquantifiable (but no doubt very small) risk of loss, whether from fraud or misadventure, in any conveyancing procedure designed to achieve what Lord Brightman called "the payment of money and the perfection of title [as] simultaneous transactions". Now that the great majority of titles in England and Wales are registered, and until the introduction of electronic transfers of title to land, the achievement of that simultaneity is in one sense actually more difficult now than when title passed with the execution of a conveyance and a vacating receipt, and the handing over of a bundle of old deeds.
61. The risk involved in accepting an undertaking from the vendor's solicitor as to the discharge of a bank mortgage is that the form 53 may not be produced. The failure may be caused either by the solicitor's dishonesty (as in Wong, or a licensed conveyancer's dishonesty as in Kaufmann) or by a last-minute dispute or misunderstanding as to the amount required to redeem the mortgage. That may not be simply a matter of arithmetic. Disputes can arise, for instance, where a developer is developing land by building houses and selling them off in phases, the whole estate being subject to charges to different mortgage lenders to finance both the original acquisition of the land and its development. In a situation of that sort the informal renegotiation of credit arrangements can lead to disputes which should be no concern of the purchasers of houses.
62. The system described and recommended in the advice from the Council of Mortgage Lenders seeks to solve these problems by placing the responsibility firmly on the vendor's solicitor. As between the mortgage lender and the solicitor, his position is to some extent eased by the recommendation that mortgage lenders should normally stand by redemption statements even if they prove erroneous. But as between the solicitor who gives the undertaking and the purchaser, the undertaking is unconditional and unqualified. Moreover it is backed by the summary procedure available for its enforcement, and by the Solicitor's Indemnity Fund (or the equivalent arrangements which have now replaced it) and the Compensation Fund.
63. The possible alternative system mentioned by Lord Brightman in Wong (and by Millett LJ in Kaufmann) is not a normal practice in this country. The evidence of Mr Coates (who was cross-examined about this at some length) was that it was impossible to say how it would work because it was untried and untested. He agreed at one point that if it were workable "it would potentially be more fault-free than the present accepted system" but he was doubtful about what the attitude of mortgage lenders would be. He said that it was very unusual for a purchaser to know the state of the account as between the vendor and his mortgage lender, and it was not the practice for a purchaser's solicitor to establish direct contact with a mortgagee.
64. We have, after some initial scepticism, been persuaded by Mr Briggs' lucid submissions that the profession's failure to adopt an alternative system cannot be ascribed to complacency, conservatism, inertia or an unreasonable reluctance to contemplate that a fellow solicitor might be dishonest. The alternative system would in our judgment have significant disadvantages. It would involve the purchaser in matters (that is, the state of the account as between the vendor and his mortgagee) which ought not to be his concern. It would involve additional expense and, sometimes, delay. It would also create a new risk. If a purchaser's solicitor felt himself obliged to address direct inquiries to the mortgagee, and to insist on answers to them, it might be argued that the purchaser had been relying on those rather than on the vendor's solicitor's undertaking. If doubt were cast on the purchaser's reliance on an unconditional undertaking then the cure might be worse than the disease.
65. In order to succeed in the appeal Daybells does not have to prove that the alternative system would be unworkable or that it would expose clients to greater risks. In the absence of an alternative system actually adopted by a significant number of conveyancing solicitors, it is sufficient to show that the practice now routinely followed by English solicitors (with the approbation of the Law Society and the Council of Mortgage Lenders) is (in Lord Browne-Wilkinson's words in Bolitho) one on which "the experts have directed their minds to the question of comparative risks and benefits and have reached a defensible conclusion on the matter". In our judgment Daybells has shown that.
66. We must however add that we were and are troubled by the aftermath of the transaction which went awry in this case. The new mortgage lender, BCCI, took proceedings in June 1990, but against Daybells, not Mr Shaw. It was Daybells' joinder of Mr Shaw that led to the Midland Bank charge finally being discharged (by Mr Shaw's insurers) in May 1993. There was no rapid summary enforcement of Mr Shaw's undertaking such as Mr Briggs commended as one of the central justifications of the English practice. The judge did not make findings about what occurred between the various parties in the year following completion, although we were told that Mr Wright had ceased to act for Mr and Mrs Patel by the end of that period. Mr Smith confirmed to us that his clients' claim against Daybells had originally included an allegation of breaches of duty in the advice which Mr Wright gave to Mr and Mrs Patel, and in what he did or failed to do on their behalf, in the period after completion, but that this part of the claim had been deleted by the amendment of paragraph 17 of the statement of claim. We cannot therefore take this point further save to say that we would regard it as being normally part of a purchaser's solicitor's duty to his client to take speedy steps to enforce the undertaking of a vendor's solicitor (in relation to the discharge of a mortgage) once he is aware that the solicitor is in breach of his undertaking. It is an unsatisfactory feature of this case that on one of the very rare occasions on which a completion has gone wrong otherwise than through fraud and the matter has come to court, a solicitor's undertaking seems to have failed to provide the necessary protection. But that cannot affect the principle of the matter.
67. We would therefore decide the appeal on the first issue on the broad general ground which was Mr Briggs' preferred position. We think that the judge was right, for the reasons which he gave, in not attaching importance to the particular features relied on by Mr Smith (Mr Shaw's status as a sole practitioner, and the short-term nature of the BCCI loan). We need not comment on the particular features relied on by Mr Briggs except to say that Mr Wright appears to have given his clients skilful and conscientious help in a transaction in which their financial resources were hard stretched, and he seems to have shown great energy in achieving the last-minute completion. It was not his fault (at any rate on any pleaded issue) that the transaction turned out so disastrously for his clients.
68. For these reasons we dismiss the appeal on the first issue. Because of listing difficulties and an over-optimistic time estimate we were unable to hear argument on the second issue (which may now be of no practical importance, except as to costs, in the absence of an appeal to the House of Lords on the first issue). Counsel will no doubt give careful consideration to whether the appeal on the second issue can or should proceed.
Order: appeal on first issue dismissed with costs; permission to appeal to the House of Lords refused; issue two stood over with liberty to apply for directions pending outcome of possible appeal to the House of Lords. (Order does not form part of approved Judgment)