Summary

Solicitor acting for mortgagee in a re-mortgage has a duty to ensure that it is properly signed by each of the borrowers.

Facts

Appeal and cross-appeal from Lloyd J sitting in the Chancery Division on findings in third party proceedings. The plaintiff and her husband ('the borrowers') jointly owned a substantial property in North London and the husband arranged a re-mortgage of the property with the respondent ('TMC'). The appellant ('the solicitors') were instructed to act for TMC, and solicited and obtained, instructions from the husband to act also for the borrowers. The solicitors had no contact with the plaintiff, and paid the net proceeds of the re-mortgage to an account in the name of the husband alone. In fact, the plaintiff never signed the re-mortgage and her purported signature was a forgery. TMC claimed damages for negligence in third party proceedings against the solicitors, alleging that (i) they were in breach of their undertaking that monies would be applied solely for securing a first mortgage; (ii) they were in breach of their undertaking that the documents would be properly executed; and (iii) they were in breach of their general duty of care to TMC. Lloyd J decided issues (i) and (iii) in favour of the solicitors, but decided issue (ii) in favour of TMC and awarded damages for negligence. The solicitors appealed on issue (ii) and TMC appealed on issues (i) and (iii).

Held

(1) The judge had been right to decide issue (i) in favour of the solicitors. The cross-appeal on this issue was dismissed. (2) He had also been right to decide issue (ii) in favour of TMC. The appeal on this issue was dismissed. (3) He was wrong to decide issue (iii) in favour of the solicitors, as they were in fact in breach of their duty of care. Cross-appeal on this issue allowed.

Judgment accordingly.