England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY

		The Guildhall, Small Street, Bristol 1
		12th September 1997

MR JUSTICE CHADWICK:

1. This action, 1996 N 0523, is one of many brought by the plaintiff, Nationwide Building Society, against solicitors instructed by the Society in relation to domestic mortgage transactions at or about the end of 1989. The matter comes before me under a notice of appeal served by the defendant, Mian and Co., a firm of solicitors, against a decision of the District Judge on 1st August 1997 refusing to strike out certain allegations in the statement of claim. By way of completeness, it is to be noted that the District Judge did direct that certain other parts of the statement of claim should be struck out.
2. It appears that the District Judge's order has never been drawn up. Formally, therefore, the matter is before me de novo. I must consider whether the defendant's summons, which was before the District Judge, ought to succeed in whole or in part.
3. The proposed loan was in the sum of £81,900 and to be secured on property known as 63 Station Road, Upper Gwynaman, Dyfed in Wales and on endowment policies to the amount of £81,900 to be effected by the borrower on his life. The offer of advance was made on 4th September 1989. It recorded, inter alia, that the purchase price of the property was £140,000.
4. The allegations which the defendant seeks to strike out may be summarised as follows. First, that the defendant failed to report that there was a reduction from £140,000 to £120,000 in the purchase price between the date of application and the date of contract. Secondly, that there was a failure to ensure that the endowment policies to be charged were in force at the time of completion. It has subsequently been discovered that they had lapsed through non-payment of the second and subsequent premiums. Thirdly, it is said that there was a breach of duty in failing to send to the Society title deeds or other documents of title held by the defendant firm between the date of a request on 26th March 1992 and a date in September, not later than 23rd September 1992.
5. The last of those points can be dealt with shortly. It appears from correspondence disclosed on discovery that the Society requested the documents of title on 26th March 1992. On the same day it put the property on the market through agents at an asking price of £49,950. There is no evidence that any offer for the property was received before September, or possibly December, 1992. In those circumstances, the defendant says that, although there may have been a failure to return the title documents over a period of six months, there is no indication that that caused the plaintiff Society any loss at all; because there is no evidence (and it is not pleaded) that the absence of title documents during that period of six months led to any delay in the marketing process.
6. It seems to me that the true position is that there was a breach of the contract of retainer by failing to respond to the request of 26th March 1992 promptly; but that, as things presently stand, the likelihood is that that breach will lead only to nominal damages. In those circumstances, it seems to me right to strike out the particulars under paragraph 29 of the statement of claim; to strike out the allegation in paragraph 28 that there was a failure to respond until November 1995 (because it is now accepted that that allegation cannot be substantiated) and to direct that, unless the plaintiff serves particulars of the damage alleged arising from the six month delay within 28 days, the whole of paragraphs 26, 27, 28 and 29 be struck out.
7. If the plaintiff does serve particulars alleging any damage — or claiming nominal damage — then I do not think it right to strike out the allegation in its entirety; but the plaintiff will be well aware of the risks of pursuing a claim of this nature for nothing other than nominal damages.
8. That leaves the other two matters: first the allegation of failure to notify the reduction in purchase price. That is a curious allegation to make in the circumstances that, in the report on title sent by the defendants to the Society on or about 19th September under cover of a letter of that date, the defendants have completed the relevant box as to the amount of the purchase price with the figure £120,000. On its face therefore the report on title contains a notification that the purchase price is £120,000 and not £140,000.
9. The warranties in the report on title include a warranty that any discrepancies between the transaction proposed and the offer of advance have been reported to the Society in writing. That confirmation appears below the report as to the amount of the purchase price and on the same page. What is said by the plaintiff is that it is not enough for solicitors to complete the form provided with the information sought; they must draw attention to the fact that the information given in response to the request is different from the information in the offer of advance. In my view, that is unrealistic. It seems to me that a solicitor who does exactly what he is asked to do — by filling in the true purchase price on the report on title — does all that he is required to do in that respect under his instructions. If the Society is unable, within its own organisation, to compare the figure given in the report on title with the figure given in the offer of advance without having a discrepancy expressly drawn to their attention, then they should make clear to solicitors who act for them that their resources are so limited that they require assistance in that matter.
10. It follows, in my view, that the allegations relating to failure to disclose the reduction in purchase price must fail and should be struck out, whether pleaded in contract, tort or breach of trust.
11. That leaves the question as to the failure to report non-payment of the endowment policy premiums.
12. It was an obligation imposed by the solicitors' instructions (see general condition 16) that the solicitor was to ensure that where an endowment policy was required by the Society the first or current premium had been paid. It is admitted, now, that the second and current premium had not been paid either at the time of the completion or at any time after 1st November 1989. In those circumstances, it seems to me plain that there was a breach of duty both in contract and in tort: breach of duty in contract because the contract imposed that obligation on the solicitors and a breach of duty in tort because a solicitor instructed to take an insurance policy by way of security ought to satisfy himself that the policy is indeed in force.
13. The claim in contract is statute barred. That is accepted by the plaintiff, in that completion of the transaction on 18th or 19th December 1989 was more than six years before the issue of the writ on 29th February 1996. But it is arguable that that six year period of limitation would not defeat the claim in tort, in that the damage may be said to have been suffered later.
14. The difficulty for the plaintiff in relation to the tortious claim is that no claim in tort can be advanced unless damage is shown. It is because the claim is not complete without damage that the answer to the limitation point is founded on the need to show damage. Whether or not damage was caused by the defendant's failure to ensure (and confirm) that the premiums had been paid before the matter was completed is, as it seems to me, a question to be decided in accordance with the principles explained by Lord Hoffman in the Saamco decision in the House of Lords (Banque Bruxelles Lambert v Eagle Star Insurance Co. Ltd. [1997] AC 191). In my view, that question is not so obvious that it merits striking out at this stage. It may well be that the damage found to have been caused by the breach of duty arising from failure to ensure that the premiums were paid will turn out to be very small; but I do not think it is possible to say with confidence that it will be negligible. Accordingly, it seems to me that that claim ought not to be struck out but must be allowed to proceed.
15. The plaintiff seeks in addition to advance a claim based on breach of trust. The claim is put on the basis that the defendant was entrusted with the advance monies for the purpose of completing a transaction in which two forms of security were to be taken: first, the security by way of legal charge over the property itself, and secondly the security by way of assignment over the endowment policy.
16. Failure to obtain security over a valid endowment policy — or, more accurately, parting with the advance monies without having obtained that security — is, it is alleged, a breach of trust. In my view, that contention cannot stand in the face of the reasoning of the Court of Appeal in Bristol & West Building Society v Mothew [1997] 2 WLR 436.
17. This is not a case in which the defendants failed to take an assignment of the policies. There was an assignment executed by the borrower. The problem was not that the policies were not assigned; but that what was assigned was, unknown to the defendants, already valueless or void.
18. It seems to me that the position is not materially different from that in which solicitors take, for the benefit of the lender, a mortgage over real property in circumstances where it subsequently transpires that the mortgagor did not have good title. No doubt they are, or may be, in breach of duty in failing to investigate whether the title was good or not; but, as I understand the law, they would not be held to be in breach of trust if through carelessness they failed to identify a defect in title.
19. For those reasons I am satisfied that the breach of trust claim cannot proceed and should be struck out.
20. The order that the District Judge proposed to make was to strike out those parts of the claim which related (i) to breach of trust, (ii) to breach of contract and (iii) to the claim in tort in respect of the failure to inform the plaintiff of a reduction in the purchase price of the security. I would affirm that order, leaving the claim as to damages in tort arising from failure to ascertain that premiums had not been paid and, subject to the provision of particulars, as I have already indicated, the claim for damages in respect of the failure to forward the deeds of title following the request on 26th March 1992.
21. MR FLENLEY: My Lord, that leaves two matters. One very brief matter: the question of whether this judgment may be reported or disseminated outside these walls. Your Lordship in relation to yesterday's hearings gave a direction in that regard. I would invite your Lordship to make the same direction for the same reason in relation to this case.
22. Secondly, so far as costs are concerned, I would ask for an order for the defendants' costs on this basis: that the third claim which the District Judge made no order in relation to, you have now made an order in relation to. There has been a concession that as pleaded it cannot stand and while it may appear to be de minimis, I would make simply two points: one is that while that claim remains, if it had remained the defendant would have to go to the trouble of defending that case and, although the District Judge said it might not be arguable, that indication was in no way binding on any subsequent trial judge and unless and until the matter is actually struck out the defendants have to prepare to defend the claim as pleaded. They have accepted that it is inadequately particularised and they have been ordered to particularise it, and that is the fact of the outcome.
23. My Lord, secondly, in relation to the observations your Lordship made in the earlier case today as to managed lists, I would simply observe this: that this case entered the managed list only last Friday, the original application to which this relates was made in June and the appeal was at the start of August. Both of those were before the directions of course in relation to these Nationwide managed lists which your Lordship made on Wednesday. So while it is now the case that this matter is in the managed list, your Lordship may be bound to say that applications of this kind were inappropriate within the list, it has only just entered the list and at the time when this application was initiated it was not in the list at all and, had the claim been struck out, of course, that would have saved a considerable amount of costs. So in my respectful submission it was not a waste of time.

MR JUSTICE CHADWICK: Do you want to say anything about the matter being treated as judgment in Open Court?

MR HURST: No, my Lord, I do not.

MR JUSTICE CHADWICK: My judgment can be treated as delivered in Open Court. Are you content with plaintiff's costs in cause, or do you want more than that?

MR HURST: Plaintiff's costs in cause of the application, my Lord.

MR JUSTICE CHADWICK: You are content with that?

MR FLENLEY: I am content with that.

24. MR JUSTICE CHADWICK: Then the order for costs that I make is plaintiff's costs in cause on the basis that the appeal against the District Judge's order has effectively and for most practical purposes failed, but that the defendants will not have to pay the costs of this application if they succeed at trial or if the plaintiffs fail to get an order for the costs of the action at trial because they only recover nominal damages.