England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHESTER COUNTY COURT
His Honour Judge Barnett

		Royal Courts of Justice Strand, London, WC2A 2LL Wednesday 27th June 2001

THE HON. MR JUSTICE CARNWATH:

1. This is an appeal by the defendants against a judgment of HH Judge Barnett in the Chester County Court, whereby he awarded the claimant damages in an agreed sum of £22,500 against her former solicitors. The claim arose out of advice given in connection with the execution of a second charge over the family home.

Background

2. The claimant, Mrs Rozzell, married David Rozzell in 1987. They had both been previously married. They had met in 1980. He was a graphics designer. By 1986 he had had two failed attempts to set up in business on his own, and to use her words he was "in a real financial mess". Although she took out a loan to try to help him, this was of limited help; he lost his home, and at the same time his marriage broke up. She became divorced about the same time. On their marriage in 1987, they purchased a house at 529 Crewe Road, Wistaston, Crewe, in their joint names. Mrs Rozzell used her share of the proceeds of the sale of her former matrimonial home as part of the purchase money. They had a son, Craig, in 1988.
3. In 1988, Mr Rozzell was appointed national coach for the British Amateur Gymnastics Association, and also director of a charity called The Special Gymnastics Association. This charity he described as his "dream child"; and he was the "driving force" behind it.
4. Between 1988 and 1992 the family had no serious financial worries. However, in his job with the charity Mr Rozzell incurred substantial expenses, which were paid out of an overdraft with the National Westminster Bank. Although these were supposed to be reimbursed from time to time by the charity, it seems that by 1992 he had run up a substantial overdraft in his own name. The precise amount is not clear. Mr Rozzell mentioned a figure of £10,000 in his statement, but his wife believed the debt to be of the order of £21,000, and the Judge refers to it being "in the region of £20,000". Mrs Rozzell was sufficiently worried to make enquiries about obtaining a second mortgage on the house to clear the debt, although she notes that her husband seemed "totally unconcerned".
5. In 1992, following a dispute with the charity, Mr Rozzell was dismissed. It was in connection with his unfair dismissal proceedings (ultimately successful) that he first made contact with the defendants and began to be advised by Miss Carlisle, one of their employed solicitors.
6. When the bank became aware of his dismissal, it sought some security for the overdraft on the expense account. As the judge says:

"At that time things must have been very difficult and very concerning for the family. The house was subject to a first mortgage in favour of The Halifax, that of course needed servicing. Not only that but there was the overdraft which the claimant believed to be in the order of £21,000 owing to the bank, and of course there was no income coming in to the household as Mr Rozzell had been dismissed from his employment".

He assumes that there were discussions between Mr and Mrs Rozzell as to what to do. It was proposed to offer the bank a second mortgage on the house as security for the overdraft. The judge made no finding whether or not (as Mr Rozzell suggests) that proposal resulted from advice of the defendants. At that time the house was worth about £90,000 and was subject to a first mortgage in favour of the Halifax Building Society securing about £50,000.

Meetings with the solicitor

7. On 10th June the National Westminster Bank wrote to Miss Carlisle enclosing copies of the proposed mortgage. She was asked to ensure that the implications of the mortgage were explained to the customers, and that, if Mrs Rozzell required separate legal advice, she should be put in touch with another partner of the firm. Following that letter, Miss Carlisle wrote to the Rozzells suggesting a meeting to discuss the implications of the mortgage, and she advised Mrs Rozzell that she could take independent legal advice if she wished.
8. There were, as the judge found, three meetings: on 15th June, 21st July, and 31st July 1992. Although there was a conflict of evidence on this issue, the Judge accepted Miss Carlisle's evidence, both as to the number of the meetings and as to who was present. Mrs Rozzell had claimed to be able to remember only one meeting (which the judge took to be the first), although she accepted that she might have gone back later to sign the mortgage. The Judge also accepted, as seems to have been common ground, that the last meeting on 31st July was principally for the purpose of executing the charge, and is not significant in considering what advice was given.

The Judge's assessment of the evidence

9. In looking at the evidence on which the judge relied for his finding of negligence, it is helpful to have in mind his own assessment of the quality of the evidence before him. This consisted of the statements and oral evidence of Mrs Rozzell and Miss Carlisle, and attendance notes taken at the time by Miss Carlisle. Although Mr Rozzell also gave evidence, the judge did not see his evidence as adding much support to the claimant's case. Indeed, according to his statement, his real concern at the time was over the unfair dismissal claim; the issue of security for the overdraft was "very much a secondary issue".
10. The judge commented that Mrs Rozzell found giving evidence "a difficult experience" and that she was "a highly nervous witness". He noted that the evidence "was in some respects lacking in precision", and that he had found her to be in error as to her evidence about the number of meetings. Accordingly, he said:

"I have to approach her evidence with some caution, bearing in mind the inconsistencies between the evidence and the pleaded case".

With regard to the attendance notes, he reminded himself that:

"Attendance notes of the sort that I have available to me are not intended as a verbatim record of what was said during such meetings or consultations, they are in effect a shorthand record of what was said and what had occurred."

He made no general comments about the quality of Miss Carlisle's evidence. However, on the disputed question of the number of meetings, he had referred to her evidence as "compelling", and he had "no hesitation" in preferring it on that aspect of the case. On the other matters, he referred to her statement without apparent dissent. We were told that her statement was, in the normal way, adopted as her sworn evidence. In the absence of any specific criticism, I infer that he accepted her as an honest and conscientious witness, and her statement as reliable.

Particulars and evidence of negligence

11. The relevant particulars of negligence, in paragraph 6 of the claim, were as follows:

"(i) Failed to advise the plaintiff of the purpose and implications of the mortgage, and in particular the significance of signing the mortgage; specifically, the defendants did not advise the plaintiff or her husband that the bank could recover from the plaintiff's share in the proceeds of the sale of the property in respect of any liability of the plaintiff's husband to the bank only if the plaintiff signed the charge.

(ii) Gave misleading advice concerning the position of the plaintiff if she did not sign the charge; specifically advised that the bank could force the plaintiff to leave the property whether or not the charge was signed (following a bankruptcy or charging order on the basis of the husband's unsecured indebtedness to the bank) thus implying that the plaintiff's position was no different whether or not she signed the charge when in fact the plaintiff's interest in the proceeds of sale was only at risk if the charge was signed".

The judge commented that the particulars of negligence "became more refined" as the case proceeded.

12. Considering the first meeting of 15^th June, he quoted Mrs Rozzell's evidence of what had been explained to her:

"(a) if we simply did nothing then Dave would be bankrupt, which would ultimately result in us losing the house;

(b) the only thing that could be done in order to avoid Dave being made bankrupt was to sign the charge and hopefully avoid this, I remember the solicitor saying that it was likely that Dave would not be unemployed forever and that once he was working the debt could be repaid."

She added:

"I did not believe that I had any option other than to sign the charge and hopefully avoid Dave being made bankrupt. As I understood it, the consequence of Dave being made bankrupt were that we would lose the house and I wanted to avoid this at all costs."

13. The judge then reviewed the attendance note of that meeting. He noted a phrase "… for his indebtedness not hers…", which he interpreted as a reference to the fact that the debt to the National Westminster Bank was on an account in Mr Rozzell's name, not in joint names. He also quoted a passage from the note referring to the advice given and Mrs Rozzell's understanding:

"Advised the legalities re second charge, can enforce at any time. Halifax Building Society first charge, second charge Nat West covers past and future debts limited to £50,000. Mrs Rozzell very quiet, understood but upset by the whole matter. Didn't wish to take independent advice, advised on shortfall liability."

14. On the basis of that note, and Mrs Rozzell's cross-examination on it, the judge made some important findings as to the concessions made by her:

"....she agreed that she came to the solicitor's office intending to sign up, and agreed also that it was Miss Carlisle who advised them not to sign there and then but advised a delay. She agreed that before she signed the charge she knew it was her husband's debt and that after she signed it she would be liable as well, and she also agreed that she remembered being told that the debt could increase in the future up to a maximum of £50,000".

The reference to advice on "shortfall liability" was taken by the judge as referring to a discussion, remembered by Mrs Rozzell, in which it was explained to her that the whole of the equity would be "up for grabs".

15. The Judge then commented:

"That evidence and those concessions and agreements made by the claimant during the course of her cross-examination go no way to support, and in some senses are contrary to, how the case is pleaded at (i) of the particulars of negligence..... However, as I said, the matter became more refined during the course of evidence and it became clear that the thrust of the case for the claimant really condensed upon the second particular of evidence at (ii) in that it was the claimant's case that no explicit advice was given to her that if she did not sign the charge then her interest would be preserved in the event of her husband's bankruptcy. In other words, that even though as a consequence of the bankruptcy or a charging order being obtained possession of the house could be obtained, that her interest would be preserved in the house, albeit that that would be converted into money and therefore she would have money left over at the end of the day."

He noted that the claimant was "firm in her evidence… that that explicit advice was not given to her." He made no reference to Miss Carlisle's own evidence about that meeting.

16. He then moved to consider the second meeting of 21^st July, of which, as he noted, the claimant had no recollection. For this meeting, he relied on the contents of the attendance note and Miss Carlisle's evidence about it. This meeting followed a visit, probably Mrs Rozzell alone, to the Citizens' Advice Bureau. Although neither of the Rozzells had mentioned that visit in their evidence, the judge found, as was apparent from the attendance note, that the visit had happened and that it was discussed at the meeting on 21^st July.
17. It was also clear from the attendance note, as again the judge accepted, that Miss Carlisle was at pains to dispel the misleading impression, apparently gained by the Rozzells from the CAB, that they could avoid losing the house by letting the bank take them to court and submitting to an order to pay £5 per week. That was covered by the first part of the attendance note, and the judge made no criticism of Miss Carlisle's advice in that respect.
18. The last part of the note dealt with her advice as to the effect of the mortgage. It read:

"Advised that if they signed the mortgage then the bank can foreclose as soon as they wish; if don't, proceedings plus costs and can if they choose to do so go for a charging order or bankruptcy. Either way can eventually get wife out of house".

The Judge commented: "The last sentence is of some significance".

19. He then quoted parts of Miss Carlisle's statement (from paragraphs 9 and 10) commenting on the note:

"I recall saying that I felt the CAB had over-simplified matters if that was all that had been said and that if in fact the CAB had advised in this way it was dangerous. I was concerned that the Rozzells should understand that it was possible to lose their home either way. This was Mrs Rozzell's greatest concern.

On that occasion we re-capped on the position but I went into more detail concerning various methods of enforcement which the Bank could take. I cannot recall exactly the words which were said but I am sure that I advised on the basis of Mrs Rozzell not signing and the Bank proceeding against Mr Rozzell alone and then on the basis of both signing, with the action that could then be taken against both including their respective interests in the property.

I believe that I also clarified the advice given by the CAB as I did not want Mrs Rozzell to believe that by not signing the charge she would avoid the chance of the property being re-possessed…"

The judge's findings on negligence and causation.

20. It was on that evidence that the judge relied in reaching his conclusion on the issue of negligence, as set out on page 14 of the judgment:

"It seems to me abundantly clear that Miss Carlisle was concerned that the claimant should know, and know clearly, that the house was at risk and could be lost even if the charge was not executed, for example by bankruptcy proceedings or following a charging order being obtained. That was proper advice, but it seems to me clear from the attendance notes and from Miss Carlisle's statement that the claimant was not expressly advised that if she did not execute the charge that her interest in the property, albeit converted to money, would be preserved even in the event of her husband's bankruptcy. In other words, that although the house would be lost there would still be a pot of money. In my judgment that was a crucial and significant omission."

He added that he reached that conclusion with regret, because he considered that generally Miss Carlisle's conduct of the matter and the advice she gave were "impressive".

21. That is the finding which is under direct challenge in this appeal. To see it in context, however, it is relevant to refer also to the judge's finding on the issue of causation. The defendants had argued that, even if properly advised, the claimant would nonetheless have executed the charge. They pointed to the facts that she had already been in the process of arranging a second mortgage, even before Mr Rozzell lost his job, and that execution of the charge would have bought the family time. However, the judge found "on balance" in favour of the claimant:

"I have come to that conclusion as the result of one piece of evidence from the claimant. She told me that had her interest been safe the family could, in effect, have started again as opposed to being, as she undoubtedly saw it, condemned to take council accommodation which, in her words, was 'not acceptable'. That evidence came out in an entirely natural fashion and in a clear fashion, and although the claimant was far from clear on many aspects of the case, and indeed wrong as to her recollection as to the number of meetings that there were, she was clear and positive about that issue and I found that evidence compelling. Here was a mother concerned for her children. She had lived in privately owned accommodation during her first marriage and during her second marriage. She considered the potential move to council accommodation as unacceptable. I find that evidence logical, consistent and compelling."

Issues on the Appeal.

22. There is no issue, as I understand it, on the law. Mr Hubble, for the defendants, accepts that it would have been negligent for the defendants not to have made it clear to Mrs Rozzell that, in the event of her not signing the charge, her financial interest in the property would be preserved. He also accepts that, while this Court has power to disagree with the Judge's conclusions on issues of fact as well as law (see CPR Part 52.11 (3) (4)), it will only interfere with the conclusion of the Judge, based on his assessment of the evidence, in a plain case.
23. However, he challenges the Judge's finding that the necessary advice was not given. That finding, he submits, is inconsistent with the evidence of Miss Carlisle which the Judge accepted, and with concessions made in evidence by Mrs Rozzell as to what was explained to her. In particular, he complains that, in relation to the first meeting, the judge made no reference at all to Miss Carlisle' evidence, and only partial reference in relation to the second.
24. She dealt with the first meeting at paragraph 7:

"I also advised on the shortfall liability, referring to the fact that the Halifax had a first charge anyway and the second charge only kicked in after this. On the joint ownership aspect and the relative interests of Mr and Mrs Rozzell, I do not recall exactly what was said but I am sure this would have been mentioned in view of my recording of my attendance note that the proposed legal charge was 'for his indebtedness not hers'. I believe I would have explained that, whereas without the legal charge the Bank could only enforce against Mr Rozzell's interest in the property, the Bank once the legal charge was signed could enforce against both their interests in the property. I do recall in fact Mrs Rozzell's main concern was not so much the risk to her share of the property but rather the idea of losing her home as she had a small son at the time. Her husband was away frequently and she was afraid of something happening while he was not there. That said they both appeared reasonably confident that Mr Rozzell would soon secure new employment, and then they would have no serious difficulty in repaying the Bank."

25. As to the second meeting, after the part quoted by the judge (as noted above), her statement continued:

"I would have specifically advised that once the charge had been signed the indebtedness of Mr Rozzell would become secured on the house of which Mrs Rozzell was the joint owner. I would have made it clear that there was a risk concerning repossession and their respective financial interests. I believe I also clarified the advice given by the CAB as I did not want Mrs Rozzell to believe that by not signing the charge she would avoid the chance of the property being repossessed. Again the attendance note of 21st July 1992 is a summary of what was said although attendance is referred to as lasting 1 unit, I am sure that it lasted longer than that."

26. Mr Hubble submits, that taken with the concessions to which the judge referred in his judgment, these extracts make clear that Mrs Rozzell was fully advised as to the implications for her interest of signing or not signing.
27. Against that, for the claimant, Mr Browne says that the findings were made by the judge after a careful assessment of the totality of the evidence, and having heard the witnesses. Like the judge he concentrates on paragraph 6(ii) of the particulars of negligence, which he links with the words at the end of the second attendance note. Thus, in the words of his skeleton argument, the "key distinction", between the two paragraphs is that -

"paragraph 6(i) alleges failure (omission) to advise about particular matters whereas paragraph 6(ii) alleges that misleading advice was given and that Ms Carlisle by merely stating that "either way can eventually get wife out of house"… offered a negligently inadequate explanation to Mrs Rozzell of the consequences of her not signing the charge…"

28. Consistently with that approach, he relates his interpretation of the judge's conclusion to the second meeting:

"Even on Ms Carlisle's own evidence, it was clear that she did not advise Mrs Rozzell (to) the extent which the judge considered necessary to discharge her duty so as to properly clarify the assertion that "either way can eventually get wife out of house". The fact that the advice tendered at the first meeting may have been accurate did and does not disturb Miss Carlisle's obligation to fully advise at the second meeting in circumstances where she tendered the advice recorded in the final sentence of the (second) Attendance note…"

29. That conclusion, he says, is supported by his finding, in relation to causation, that she would not have signed if she had known that her own interest would be safe. The judge was not bound to accept all Miss Carlisle's evidence or reject all Mrs Rozzell's evidence on every issue.

Consideration

30. In interpreting the judgment, I think that Mr Browne is right to concentrate on the second meeting, and the last words of the attendance note of that meeting. Although the judge was impressed by parts of Mrs Rozzell's evidence as to what she had been advised at the first meeting, that is not the evidence on which he ultimately relied in making his finding that the necessary advice was not given. That finding followed on from his discussion of the evidence relating to the second meeting, including his specific reference to the last words of the second attendance note. It was based, in terms, on what he regarded as "clear from the attendance notes and from Miss Carlisle's statement". That interpretation also helps to explain his omission of any reference to Miss Carlisle's account of the first meeting.
31. On the other hand, I do not accept, as Mr Browne appears to submit, that the judge is to be taken as having implicitly rejected parts of Miss Carlisle's evidence. If he had, I have no doubt that he would have said so, in the same way that he explained his "cautious" treatment of Mrs Rozzell's evidence. There is nothing to suggest that he rejected any part of Miss Carlisle's evidence, including paragraph 7. On the contrary, the inference I draw is that he omitted it because he regarded it as generally uncontentious having regard to the concessions made by Mrs Rozzell, and that he saw the real issue as turning on the second meeting.
32. Indeed, on most aspects, Miss Carlisle's evidence was wholly consistent with that of Mrs Rozzell. Thus, for example, there is no criticism of the advice that, if she failed to sign, then the likely result would be that her husband would be made bankrupt and that they would lose the house. The impression given by Mrs Rozzell's statement, as quoted by the judge, is that this was the consideration uppermost in her mind. This supports Miss Carlisle's recollection that her main concern was not so much the risk to her share of the property, but the idea of losing her home.
33. Accordingly, one can summarise the position on the evidence which was expressly or implicitly accepted by the Judge as follows:-

(1) The main concern of the Rozzells was to avoid loss of their house "at all costs".

(2) When they came to see Miss Carlisle, it had been their intention to sign immediately, and it was only her advice which persuaded them to take more time to think about it.

(3) Mrs Rozzell understood that by signing the charge she was undertaking liability for her husband's debt.

(4) At the first meeting it was explained to her that " whereas without the legal charge the Bank could only enforce against Mr Rozzell's interest in the property, the Bank once the legal charge was signed could enforce against both their interests in the property" (Miss Carlisle para 7).

(5) At the second meeting Miss Carlisle "advised on the basis of Mrs Rozzell not signing and the Bank proceeding against Mr Rozzell alone and then on the basis of both signing, with the action that could then be taken against both including their respective interests in the property" (Miss Carlisle para 9).

34. Against that background, one considers the central allegation, based on the words at the end of the attendance note, that Mrs Rozzell was given the impression that her position was "no different whether or not she signed the charge." In my view, this allegation cannot be reconciled with the evidence I have summarised. She understood that by signing she was undertaking liability for her husband's debt; and she was told that, whereas before signing the Bank could enforce only against her husband's interest, after signing it could enforce against both. I find it impossible to see how this could be interpreted by a person of reasonable intelligence (which Mrs Rozzell clearly was) as indicating that her position would be "no different." The judge himself commented on the "shorthand" nature of such attendance notes. They were in fact entirely accurate, as regards the issue uppermost in Mrs Rozzell's mind, that is the loss of the house.
35. She may not have been advised in terms that her interest would be "preserved" if she did not sign. But that was the clear implication of the advice that, if she did not sign, the bank could enforce only against her husband's interest. That advice, on Miss Carlisle's statement, was clearly given at the first meeting. Although it is not spelt out in her account of the second meeting, she does refer to having advised on the alternatives of signing and not signing, and on the action that could be taken against "their respective interests". The only possible inference, in my view, is that she repeated at least the gist of the previous advice.
36. Finally, I do not think that the Judge can be taken as having found her negligent merely because of her failure to use a colloquial expression of the kind adopted by him: "that although the house would be lost, there would still be a pot of money". In the first place, that was not how the matter was pleaded. The essence of the pleaded case was the implication that her position would be no different whether or not she signed the charge. It was not a failure to use sufficiently colloquial language to get her message across. In any event there is no suggestion that Mrs Rozzell was not able to understand the advice she was given. Indeed she clearly had some previous experience of dealing with the difficult financial problems of her husband, (both before and after their wedding) and in dealing with charges over property.
37. It should perhaps be added, although the subsequent history was not gone into in any detail, that the advice appears to have had its desired effect, in that the signing of the charge did buy further time for the family, and enable her to keep the house for the time-being. (Indeed, we were told that she is still living there.) Of course, we do not know what would have happened if she had failed to sign. However, there is nothing to throw doubt on Miss Carlisle's advice that in that event they would have risked her husband's bankruptcy and loss of the house. Apparently, Mrs Rozzell would have regarded that as an acceptable alternative, if she had realised that she could extract some money from the wreckage. However, on the evidence, her failure to realise that cannot be attributed to any negligence on the part of the defendants.

Conclusion

38. In conclusion the claimant's case, as summarised by the Judge in its refined form, was that:

"No explicit advice was given to her that if she did not sign the charge then her interest would be preserved in the event of the husband's bankruptcy."

39. The Judge's conclusion that a failure to give that advice was "clear from the attendance notes and Miss Carlisle's statement" cannot be supported, since he disregarded parts of her evidence, which pointed to the opposite conclusion. However, I would go further. Looking at the evidence as a whole, and in particular the lack of any doubt cast on the reliability of Miss Carlisle's statement, the only reasonable inference is that she did advise specifically on the effect on Mrs Rozzell's interest in the property if the charge was signed.
40. For these reasons, notwithstanding the deference which must be paid to the Judge's conclusion on what is primarily a question of fact, I would allow this appeal and dismiss the claim.

LORD JUSTICE LONGMORE:

41. I agree. The puzzle in this case is that, in coming to his conclusion, the judge (page 14F) relies on the attendance notes and Miss Carlisle's statement. He does not refer to Miss Carlisle's oral evidence and he only quotes the parts of Miss Carlisle's statement which refer to the second meeting. That part of her statement which refers to the first meeting with Mrs Rozzell is inconsistent with the judge's conclusion that Mrs Rozzell was not expressly advised that, if she did not execute the charge, her interest in the property would, in money terms, be preserved. Miss Carlisle relies on the reference in the first attendance note "For his indebtedness not hers" and this does, in my judgment, to some extent, support her statement because the only point of emphasising that the debt was not that of Mrs Rozzell was that, if she did not agree to sign the charge, she would not be liable to lose her interest in the sense that its monetary equivalent would be preserved to her.
42. It is thus not really conceivable in the light of these matters that Miss Carlisle did not spell out the alternative consequences to Mrs Rozzell of signing the charge and not signing the charge.
43. At the second meeting she recapped the position; it is possible that the advice was not then repeated as explicitly as before because the emphasis was on negating the advice from the CAB to the effect that the house itself would not be lost if Mrs Rozzell did not sign the charge.
44. But to my mind the advice, which the judge decided was not given, was in fact given. This appeal might well have had a different result if the judge had said that he relied on oral evidence given and the demeanour of the witnesses rather than the written material. But he says he relied on the written material in coming to his critical conclusion and it is thus a case where this court is as well placed as the trial judge to decide the truth of the matter.
45. The appeal will be allowed and it follows that, despite our sympathy with Mrs Rozzell, her claim must fail.
ORDER: Appeal allowed. The Claimant to pay the defendant's costs of the action and appeal, the determination of the claimant's liability and/or the Legal Service Commission's liability to pay such costs to be imposed, with liberty to postpone, by a costs judge in accordance with the case of Gunn. Detailed Legal Services Commission assessment of respondent's costs to be assessed at Crewe. Permission to appeal refused. (Order does not form part of approved Judgment)