Martin v JRC Commercial Mortgages Plc

A mortgage broker’s ordinary obligation is to exercise reasonable care and skill. A binding promise to achieve a guaranteed lending result requires special facts or clear language. Whether such an obligation was assumed depends on the facts and matters known to both parties when the engagement was accepted.

Indicative lending terms, issued before the broker was formally retained and before any lender or formal application had been identified, did not amount to a contractual warranty that finance would be provided. The subsequent brokerage contract, which referred to the broker’s endeavours to procure an offer from prospective third-party lenders, was inconsistent with any earlier unqualified promise by the broker to provide the loan itself.

The appellant sought finance to develop a club, restaurant and leisure business. Before he formally retained the respondent as mortgage broker, the respondent issued a letter stating that it could arrange a £100,000 loan, subject to the valuation, and specifying lender, broker and application fees.

Finance was not obtained. The appellant claimed for breach of warranty, negligent misstatement and breach of duty. The Wandsworth County Court granted the respondent summary judgment and dismissed the claim. The appeal concerned whether the letter gave the appellant a properly arguable claim that the respondent had promised to provide the finance or had assumed liability for its non-provision, and whether the claim should proceed to trial.

1. Appeal dismissed. The appellant had no real prospect of establishing at trial that the 11 May Letter contained a legally binding promise or warranty, or that the respondent was in breach of a duty of care.
2. The respondent’s ordinary obligation as mortgage broker was one of reasonable care. A stricter obligation to achieve a guaranteed result requires special facts or clear language. McNealy v The Pennine Insurance Co Ltd [1978] 2 Lloyd’s LR 18 did not assist because the respondent’s appointment as broker arose only under the Contract, whose scope defined the duty. Before then, Mr Warriner was the appellant’s broker and agent.
3. The letter had to be assessed in its objective and commercial context. It referred to indicative terms. At that stage no lender had been identified, no application had been made to a lender, and any loan would depend on a third-party lender’s decision. The communications also distinguished the lender’s fee from the respondent’s broker fee.
4. Clauses 3, 5 and 7 of the Contract confirmed that the respondent was to use its endeavours to procure a written offer of finance from prospective lenders. The appellant was fixed with his broker’s knowledge and had not objected to those provisions. They were wholly inconsistent with an intention or understanding that the respondent had already assumed an unqualified obligation to lend £100,000.
5. Platform Funding Ltd v Bank of Scotland plc [2009] QB 426 was distinguishable. There, the professional’s promise concerned his own performance. Here, the finance depended on a third party. The court also rejected postponing trial merely to obtain speculative evidence from the appellant’s broker. Since the claimed loss was incurred after the Contract, its clear terms also created a serious causation difficulty.
6. It was unnecessary to decide the meaning or effect of clause 4, or the application of the Unfair Contract Terms Act 1977 and the Misrepresentation Act 1967.

• Court of Appeal (Civil Division): On 7 February 2012, dismissed the appeal and upheld summary judgment for the respondent.
• Wandsworth County Court: His Honour Judge Welchman granted summary judgment for the respondent on 15 April 2011 and dismissed the claim with costs.