England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUUEN'S BENCH DIVISION
Mr Justice Lavender
HQ14X02671

		Royal Courts of Justice Strand, London, WC2A 2LL
		5 July 2018

Lord Justice David Richards :

1. This is an appeal against an order for damages for professional negligence against a Spanish lawyer who acted for the purchasers of holiday homes in Spain. The purchasers, who are the respondents to this appeal, in each case paid the purchase price in full but did not receive good title to the properties bought by them.
2. The respondents comprise six couples and two individuals and the personal representatives of a further couple. I will in general refer to the purchasers, including the deceased couple, as the respondents. Each couple and individual purchased a single property, except for one individual who purchased two properties. They were not commercial buyers nor could they be described as sophisticated investors. The trial judge, Lavender J, heard evidence from eight of the respondents and said that they "were the sort of people who would need professional guidance in buying property in Spain and who would trust the professionals who assisted them in that process".
3. The properties were marketed in the United Kingdom by two UK-incorporated agents (the Agents), both of which are now in liquidation. The vendor in each case was the Spanish company which was developing the holiday home estate and building the properties. It paid a commission to the Agents for each successful introduction of a purchaser.
4. The Agents offered a "one-stop" service to purchasers, including recommending a firm of Spanish lawyers to undertake the conveyancing and associated legal work. In each case, the respondents retained the recommended firm. Although there was an issue at the trial whether the Spanish lawyers were an individual (Sr Miguel Angel Aroca Seiquer) or a firm (Aroca Seiquer & Asociados) or a company controlled by Sr Aroca, the Judge found that the respondents retained Sr Aroca and the parties agreed by the end of the trial that the firm was simply Sr Aroca's trading name. There is no appeal against the judge's finding on this point. Like the judge, I will for convenience refer to Sr Aroca and his firm as Aroca.
5. The judge found that by 2002 Aroca received a large number of referrals from the Agents, to the extent that one of the Agents (Atlas) must have been by some way Aroca's most important source of clients from 2002 to 2005.
6. Between April 2002 and July 2005, the respondents contracted to purchase their respective properties and paid the purchase price in agreed instalments. On payment of the final instalment, they were given the keys of their properties and took possession of them. However, they did not receive good title to their properties. Unknown to them, the vendor had in each case mortgaged the property and failed to discharge the mortgage. It subsequently went into liquidation. Ultimately, the mortgagees took possession of the properties, save in two cases where the purchasers discharged the mortgages and obtained good title.
7. The judge held that each of the respondents had retained Aroca before paying the final instalment and that Aroca had been negligent in failing to advise them of the risks of paying the final instalment without securing good title. He further found that, if each purchaser had withheld the final instalment, the vendor would have discharged the relevant mortgage and the respondents would therefore have acquired good title. He awarded damages on the basis of the unencumbered value of the properties, except in the two cases in which the mortgages had been discharged; in those cases, he awarded the cost of doing so. He also awarded modest sums by way of damages for distress, inconvenience and lack of amenity.
8. There was no express choice of law governing the relationship between Aroca and the respondents, but the parties were content to proceed on the basis that the judge should apply English law, either because that was the applicable law or because there was no material difference between English and Spanish law.
9. The judge granted permission to appeal on four grounds (grounds 2, 4, 5 and 6). Jackson LJ refused permission to appeal on grounds 1 and 7, and Aroca did not pursue ground 3. Shortly before the hearing of the appeal, Aroca abandoned ground 4, and in the course of the hearing ground 6 was compromised. Aroca accepted that if it failed on ground 2, ground 5 did not arise for decision.
10. Ground 2 challenges the judge's decision that the contracts between the respondents and Aroca were formed when the Agents, acting on behalf of the respondents, contacted Aroca's office to arrange meetings for them. Thus, the contracts were in the case of each claimant made before they paid the final instalment of the purchase price. It followed that Aroca was under a duty to advise each of them about the risks of paying the final instalment without ensuring that arrangements were in place for the seller to transfer an unencumbered title.
11. The facts material to ground 2 may be summarised as follows.
12. In each case, the respondents contacted one of the Agents in the UK and later went to Spain to inspect properties. Either on that trip or shortly afterwards the respondents decided to purchase a property, signed a "reservation form" and paid the relevant Agent a deposit of 10% of the purchase price. Most of the respondents signed their purchase contracts on the same day as signing the reservation form, although some of them were sent the draft contract for signature later. The contracts did not accord with Spanish law as it applies to sales of new properties by builders or developers, in that they did not include provisions for the return of payments in certain circumstances relevant to this case and they were not accompanied by documentary proof of a bank guarantee or insurance contract. Aroca was aware of these defects.
13. Further instalments of the purchase price were paid and the Agents continued to provide advice and assistance to the respondents, including recommending that they engage Aroca as their Spanish lawyer.
14. Shortly after the respondents signed their purchase contracts, each received a letter from Aroca addressed to "Dear Client". The letter included the following:

"Prior to Completion of the House Purchase AROCA:-

Contact the builder to make an appointment to meet with both yourselves and the Notary in order that he can prepare the public document of purchase (the Title Deeds) following both the builder's and our instructions.

Contact the bank or intermediary to obtain the Certificate of Foreign Currency which records the purchase price and has to accompany the Title Deeds.

Conduct a search of the Land Register to check that:-

The seller owns the property;

It is free from any mortgage;

It is free of any charges or cautions."

15. The judge found that save for these "Dear Client" letters the respondents had limited contact with Aroca before their completion trips to Spain and, apart from arranging the execution of a power of attorney for one respondent, Aroca performed no services for them before their completion trips.
16. Once a property was built, the relevant Agent notified the purchaser(s) and arranged for them to visit Spain in order to, as they understood it, complete their purchase. A number of the respondents received a "pre-completion letter" from the Agent, informing them of what they would need to take to Spain and stating that, if they wished to use any lawyer other than Aroca, they should contact the lawyer direct and advise them of their completion date and arrangements. As the judge found, this was an indication that, if a respondent was using Aroca, the agent would contact Aroca on their behalf to say that they wished to use Aroca's services in connection with their purchase.
17. The judge further found that "the Agents did contact Aroca in this way in each case and scheduled meetings".
18. The judge found that during their completion trips, the respondents attended Aroca's offices either once or twice and, without meeting Sr Aroca or any other lawyer, were given a document informing them that registration of title deeds took seven to nine months and were given details of the fees they had to pay, including Aroca's conveyancing fee.
19. In several cases there was an issue whether the meeting at Aroca's offices took place before or after payment of the final instalment of the purchase price. The judge found that six purchasers or joint purchasers visited Aroca's offices first, while finding that two purchasers or joint purchasers paid the final instalment first and, in the case of one couple, he was not satisfied that they visited Aroca's office first. Some of these findings are challenged under ground 5.
20. The judge found that the scope of Aroca's retainer by each respondent was to provide a conveyancing service and that Aroca was obliged to exercise the degree of skill and care ordinarily exercised by reasonably competent Spanish lawyers who professed to be specialist in property transactions and in providing their services to English-speaking clients who were not resident in Spain.
21. The judge found that Aroca was negligent in, first, failing to warn the respondents that there was no bank guarantee as required by Spanish law; second, in failing to warn the respondents that there was no proof that the vendor was able to pass an unencumbered title; third, in failing to advise the respondents not to make any payment in the absence of such proof and of a bank guarantee; and fourth, in failing to take reasonable steps to ensure that, before the final instalment was paid, the vendor had the required bank guarantee and was able to pass an unencumbered title.
22. The judge further found that there was an opportunity for Aroca to give this advice to each of the respondents before they paid the final instalment and that Aroca should have appreciated the importance of giving that advice before the final instalment was paid.
23. As a result of Aroca's negligence, the judge found that the respondents had lost an unencumbered title to the properties purchased by them. He also held that Aroca was in breach of fiduciary duty in either preferring the interests of the Agents or the vendor to the interests of his clients or allowing the interests of the Agents or the vendor to influence the performance of his duties to the respondents. The loss was the same on each basis of liability.
24. It is apparent from the findings summarised above that the time at which Aroca agreed to act on behalf of the respondents is critical to Aroca's liability. If instructions were accepted only after a respondent had paid the final instalment of the purchase price, there may well still have been subsequent breaches of duty by Aroca but, in large part, the respondents would already have suffered their loss.
25. As noted earlier, the judge held that by making appointments to see Aroca on the completion dates, the respondents (or the Agents acting on their behalf) accepted Aroca's offer to act for them contained in the Dear Client letters. On that basis, Aroca was, in the case of each respondent, engaged to act on their behalf before payment of the final instalment of the purchase price. It is this decision that is the subject of ground 2.
26. The challenge is made on two bases. First, this was not the respondents' case, either in their pleadings or in their opening or closing submissions at trial. It was never suggested as a possibility during the trial either on behalf of the respondents or by the judge. Aroca was therefore deprived of the opportunity of calling evidence relevant to this conclusion and, in any event, counsel for Aroca did not have the opportunity to address submissions on it. Secondly, and in any event, it is unsustainable in law that the making of the appointments could have constituted acceptance of the offers made in the Dear Client letters.
27. As to the first basis of challenge, which is essentially one of procedural unfairness, I will consider first the submission that Aroca was deprived of the opportunity of calling relevant evidence. Such a challenge does not exist in the abstract. Aroca must point to a real possibility of relevant evidence that could realistically have made a difference to the judge's decision and that Aroca would have called if the point had been raised at trial.
28. Mr Turner QC, appearing for Aroca, submitted that Aroca would have sought evidence from members of staff during the relevant period. He does not suggest that they would have been able to give any evidence specifically about these respondents. Not only did the events in question occur 11 to 12 years before the trial but they handled about 3,000 purchases a year at that time. He submitted that they could have given evidence about the system that was then in place between agents and the firm for making appointments for purchasers.
29. Aroca has not, as it could have done but is not obliged to, produced evidence that would have been called. The court is therefore left to speculate as to what that evidence might have been. For my part, I am unable to see how any such evidence of system would assist Aroca's case. Clearly there was a system whereby agents provided names of purchasers to Aroca's office and appointments were made, but that was clear from the evidence that was before the judge. It was the simple fact of appointments being made which the judge held, in the particular circumstances of this case, constituted an acceptance of the offers contained in the Dear Client letters.
30. Mr Knox QC, appearing for the respondents, accepts that the judge's analysis is not one that had been spelt out in the claimants' statements of case or advanced on their behalf at the trial. Mr Turner did not therefore have the opportunity of addressing the point. On any footing, this is unfortunate. The judge's decision is made on a basis that neither party has addressed. This is capable of resulting in unfairness and, particularly as regards the losing party, may result in a perception of unfairness. Moreover, on appeal, this court does not have the benefit of the judge's reasoning informed by submissions from the parties. However, provided that there is no material evidence that would otherwise have been before the court, it is not, in the circumstances of this case, an irreparable irregularity. The matter can be, and has been, fully argued before this court. If the judge's analysis is wrong, it will be reversed.
31. This leads naturally to the second basis of challenge, that the judge's decision that the making of the appointments constituted acceptance of the offers made in the Dear Client letters was wrong.
32. Mr Turner submitted uncontroversially that, for the formation of a contract, there must be a process of offer and acceptance that is consistent with an intention to create legal relations. Words or conduct that are equivocal cannot constitute acceptance of an offer. Making appointments for purchasers with Aroca's office was equivocal. It could mean either that the purchaser wished to instruct Aroca, which would be an acceptance of his offer, or that the purchaser wished to have a meeting at his office to decide whether to instruct him. It could not therefore amount to an acceptance so as to create a contract between the purchaser and Sr Aroca.
33. It is not in doubt that an offer can be accepted by conduct. I agree with Mr Turner's submission that such conduct must be unequivocal. But, whether it is unequivocal and whether it amounts to the acceptance of an offer depends on the precise circumstances in which it occurs.
34. The relevant circumstances in this case were as follows. The properties were marketed for sale by the Agents in this country. The Agents, through their representatives and marketing brochures, told the respondents that the Agents would operate as a one-stop shop and that they recommended instructing Aroca as their lawyer in Spain for the purchase. A large number of clients, accounting for well over half the purchases completed each year, were introduced to Aroca by the Agents. After contracting to purchase a property, the respondents were sent one or more letters by the Agents, detailing the "after-sales" service that would be provided. In some cases, these included the information that they would receive a letter from Aroca giving full details of their service.
35. Each of the respondents received the Dear Client letter form Aroca. In its amended defence (paragraph 22(c3)) Aroca accepted that this constituted a contractual offer to each respondent, not an invitation to treat or other preliminary document. Each respondent arranged to travel to Spain to complete their purchase. During these trips they were escorted by representatives of the Agents and they visited their property, went to a bank to collect a banker's draft for the final instalment of the purchase price and cash to pay to Aroca for taxes and fees, attended Aroca's offices, attended a meeting with the vendor developer to pay the final instalment and receive the keys to their property and visited a notary's office. In the case of each respondent and in advance of their trip to Spain, the relevant Agent contacted Aroca's office and arranged an appointment. Aroca in fact acted for each respondent and there was never any suggestion of any other Spanish lawyer acting for any of them or of any respondent wishing to attend Aroca's offices before deciding to instruct Aroca.
36. The respondents were not commercial purchasers of their properties or sophisticated investors, and they depended entirely on the Agents and others acting for them, including Aroca, to guide them through the process of purchasing their properties.
37. In these circumstances, the judge was, in my view, right to hold that the arrangement of appointments for the respondents at Aroca's offices constituted in each case the acceptance of the offers contained in the Dear Client letters. In the circumstances of these cases, the idea that the appointments were made so that the Claimants could decide whether to instruct Aroca is fanciful. There was nothing equivocal about the purpose of arranging those appointments.
38. For these reasons the appeal, so far as it is based on ground 2, in my judgment fails. In those circumstances, it is not in my view necessary to consider the merits of ground 5 and I would dismiss the appeal.

Lady Justice Asplin:

39. I agree.

Lord Justice Gross:

40. I also agree.