E.Surv Ltd v Goldsmith Williams Solicitors

A solicitor acting for a mortgage lender must report information obtained through required title investigations where it has a material bearing on the valuation of the lender’s security or another lending decision. Contractual instructions and a certificate of title may define the solicitor’s specific retainer, but do not exclude the general duty to exercise reasonable care and skill unless their true construction requires that result. Where the undisclosed information would probably have caused the lender to seek a revised valuation, and that valuation would probably have prevented the transaction, causation is established. Contribution is assessed by what is just and equitable, having regard to blameworthiness and causative potency.

The claimant surveyors sought contribution under the Civil Liability (Contribution) Act 1978 from the defendant solicitors. The claim arose after the surveyors settled the lender’s claim concerning an allegedly excessive valuation of a property offered as security.

The solicitors admitted that they should have reported that the borrower had been registered as proprietor for less than six months. They denied any duty to report the substantially lower purchase price disclosed by the Land Registry records, relied on the CML Lenders Handbook and certificate of title, and disputed causation and apportionment. The issues were breach, causation and the just and equitable contribution.

1. Breach. The solicitor’s duty was not excluded by the CML Lenders Handbook, the Solicitors’ Practice Rules 1990 or the certificate of title. The obligation to make appropriate searches in public registers included a Land Registry search. The obligation to report results which might adversely affect the lender included matters relevant to the value of the security. The general obligation to exercise reasonable care and skill was preserved.
2. The actual purchase price, obtained from the office copy entries and substantially below the valuation, had a material bearing on the lending decision. The solicitors therefore had to report it, as well as the recent purchase date. The Mortgage Express v Bowerman duty, reported at [1996] 1 PNLR 62, arose on these facts.
3. Causation. On the balance of probabilities, the lender would have referred the information to the surveyors’ post-valuation query team. The valuer would have reconsidered the valuation and would probably have reduced it to no more than £500,000. At the lender’s maximum 85% loan-to-value ratio, the available loan would have been insufficient to discharge the existing bridging loan, so the transaction would not have proceeded. The causal chain was established overall.
4. The alternative case based only on reporting the recent purchase date failed. There was no sufficient basis to infer that the solicitors would also have reported the purchase price, and liability could not be imposed for failing to provide information which the retainer did not require them to provide.
5. Apportionment and order. Under the 1978 Act, responsibility was to be allocated by reference to blameworthiness and causative potency. Neither party was materially less blameworthy, and their causative potency was not materially different. Responsibility was therefore apportioned equally. Judgment was entered for the surveyors for £100,000, with interest as appropriate.