Nationwide Building Society v Balmer Radmore (1999)


Twelve related sample actions against solicitors arising out of losses on mortgage applications made by building society. This report identifies the specific issues related to each individual case.



In each case the judge dealt with (i) negligence and/or (ii) breach of fiduciary duty; where he found that there had been no breach of duty. he went on to consider what the position would have been if he had found for the Society on (iii) causation and (iv) contributory negligence.


Facts: Property applicants sought to remortgage found by surveyor to be in unsatisfactory location. Application dishonestly represented that property was where applicants resided and would continue to reside and that they were already substantially indebted. Solicitor had acted in previous purchase of actual residence.


Facts: Applicant submitted unsigned and undated statements of income prepared by member of the Chartered Institute of Taxation. Transaction proceeded by way of sub-sale. Judgment in default already given, extending to causes of action in tort, contract, breach of trust and of fiduciary duty, which defendants applied unsuccessfully to have set aside. Subject to the question whether contributory negligence was in principle available as a defence to a claim for breach of trust or breach of fiduciary duty, all that remained were questions of contributory negligence and failure to mitigate losses.


Facts: Transaction was of a back to back nature, involved a 38 per cent price uplift and an alleged direct payment.



HELD: (1) Negligence: At the time he sent his report on title and subsequently to the date of completion of the remortgage, the solicitor was under the impression, incorrectly, that the applicants lived at the property. None of the information that was available to the solicitor from the purchase of the previous house came to the solicitor in the course of doing the work which the Society had asked him to do and therefore the solicitor was not obliged to disclose it; indeed his duty to the applicants was to maintain its confidentiality. (2) Fiduciary duty: This claim failed because, in so far as there was a conflict between the applicants and the Society, the solicitor failed to report the relevant information through omission rather than deliberately. (3) Causation: If the Society had been told by the solicitor that the applicants were living and intended to continue living at the previous residence, the transaction would not have proceeded. (4) Contributory negligence: Given the inadequate steps taken by the Society to investigate the applicants' creditworthiness, the fact that the housing market was in decline at this time and the valuers' reservations about the property, it was difficult to see how an advance exceeding 75 per cent LTV could be justified. Damages would have been reduced by 75 per cent had the question arisen.

Action failed.


HELD: (1) Where, as here, the breach of duty involved bad faith on the part of the fiduciary to seek to reduce his liability to make compensation for his breach by reason of a want of care on the part of the person to whom the duty was owed. The pleas of contributory negligence were therefore irrelevant to the Society's entitlement in equity to recover its loss in full. (2) Contributory negligence. There was a failure by the Society to exercise any real appraisal of the applicant, a lack of concern to assess the value of his personal covenant and an excessive reliance on a valuation of the property which negligently overstated its true value. Damages would have been reduced by two thirds.


HELD: (1) Negligence: The circumstances of the purchase as they unfolded before him, including the sudden announcement of the direct payment of #66,000 (10 per cent of the purchase price), should have alerted the solicitor, and would have alerted a solicitor of ordinary competence, to the fact that he was dealing with a highly suspect transaction which called the applicant's honesty into question. The solicitor was in no position to confirm #660,000 as the price for the property and should have reported the suspicious nature of the transaction. (2) Fiduciary duty: The solicitor consciously put the applicant's interests before those of the Society. A solicitor who issued to his lender client a report on title which he knew to be false (or was reckless as to whether it was true or false) in order to obtain the funds needed to enable his borrower client to complete a transaction was acting in breach of the fiduciary duty which he owed to the lender client. The solicitor was in breach of his fiduciary duty to the Society. (3) Causation: Had the solicitor reported the suspicions he should have had to the Society, the Society would not have proceeded. Had the solicitor withdrawn, no other solicitor could have come to a different view. (4) Contributory negligence: In view of the excessive valuation relied on and the flawed assessment of the applicant's creditworthiness, had it been appropriate to do so the judge would have reduced the compensation by two-thirds.