Goldsmith Williams Solicitors v E.Surv Ltd

A solicitor acting for both lender and borrower must disclose non-confidential information obtained while performing the instructed title work where a reasonably competent solicitor would recognise that it might materially affect the value of the security or the lending decision. The duty is one of disclosure, not a duty to value the property, advise on the wisdom of lending, or investigate beyond the retainer.

The CML Lenders’ Handbook and the Solicitors Practice Rules 1990 did not exclude that duty. However, a contribution claimant must prove that the breach caused the lender’s loss. The evidential burden cannot be reversed because the defendant did not obtain evidence. Where the lender already held materially similar information, causation requires proof that the omitted information would have produced a different lending response.

The respondent surveyors settled a lender’s negligent-valuation claim arising from a remortgage of Quarnford Lodge. They sought contribution from the appellant solicitors, who had acted for both borrower and lender.

The solicitors’ Land Registry work showed that the borrower had bought the property five months earlier for £390,000, while the valuation supplied to the lender was £725,000. They did not report the earlier purchase to the lender. The High Court held that they owed and breached a reporting duty, and awarded the surveyors £100,000 contribution under the Civil Liability (Contribution) Act 1978: [2014] EWHC 1104 (Ch).

The appeal concerned whether the joint retainer imposed that reporting duty and, if so, whether the omission caused the lender’s loss.

1. Appeal allowed. The solicitors owed a duty to report the recent purchase and its substantial disparity from the valuation. However, the surveyors did not prove that the omission caused the lender’s loss.

2. Sir Stanley Burnton held that the starting point was the retainer, read with the pre-existing Bowerman duty. Clause 1.3 of the CML Lenders’ Handbook preserved general-law responsibilities. Clause 5.1.2 also recognised that material, non-confidential information discovered during the transaction should be disclosed to the lender. Its examples of misleading or no-longer-true information were illustrative, not an exhaustive fraud-based limit.

3. The Solicitors Practice Rules 1990 restricted the instructions a solicitor could accept in a joint mortgage retainer. They did not exclude the reporting duty. In particular, the obligation to make appropriate property searches and report results adversely affecting the lender encompassed the Land Registry information. The certificate of title did not narrow that obligation. Patten LJ agreed, adding that the duty is one of disclosure only: the solicitor is not required to act as valuer, detective, or adviser on the prudence of lending.

4. On causation, the lender had already received the borrower’s statement that the property had been acquired shortly before for £450,000. That information similarly called the valuation into question. There was no underwriter evidence or lending guidance proving that disclosure of the actual £390,000 price would have caused the lender to refer the valuation back or refuse the loan. The judge had effectively reversed the burden of proof by treating the solicitors’ failure to obtain such evidence against them. The surveyors therefore failed to establish causation on the balance of probabilities.

• Court of Appeal (Civil Division): Allowed the solicitors’ appeal on causation, while affirming that they owed and breached the reporting duty: [2015] EWCA Civ 1147.
• High Court of Justice, Chancery Division, Manchester District Registry: HH Judge Stephen Davies held the solicitors liable to make a £100,000 contribution to the surveyors under the Civil Liability (Contribution) Act 1978: [2014] EWHC 1104 (Ch).