The Connaught Income Fund, Series 1 v Hewetts Solicitors

A solicitor who provides a certificate of title to a lender without being retained by that lender may owe a duty limited to exercising reasonable skill and care in the statements and undertakings contained in the certificate. Absent special circumstances, the solicitor need not provide wider advice or volunteer information outside the certificate.

Agency may coexist with a creditor–debtor relationship, but its effect depends on the context. A breach of duty does not establish loss merely because the lender relied on the certificate. The lender must show that correct information or advice would probably have altered the transaction. Where the duty is informational rather than advisory, the SAAMCO limitation applies.

The claimant fund advanced money to Tiuta International Ltd, which used the funds to make a bridging loan secured on a leasehold property. The defendant solicitors acted for the borrower and Tiuta and issued an unqualified certificate of title addressed to both Tiuta and the fund.

The fund alleged nine breaches, including failure to report an earlier recorded valuation, title matters, planning obligations, asbestos, restrictive covenants, lease restrictions and the absence of an immediate charge over a proposed sixth floor. It claimed approximately £800,000 after the security was enforced. The central issues were the scope of the solicitor’s duty, breach, reliance, causation and recoverable loss.

1. Scope of duty. The solicitor owed the fund a tortious duty of care, but, absent special circumstances, it was limited to exercising reasonable skill and care in completing the certificate of title. The solicitor did not assume a freestanding duty to investigate and advise the fund beyond the certificate. The arrangements showed that Tiuta was responsible for instructing the solicitor and managing the legal work. The reasoning in Hunt v Optima (Cambridge) Ltd [2014] EWCA Civ 714 supported that conclusion.
2. Agency. The relationship between the fund and Tiuta was not exclusively creditor and debtor. A form of agency could coexist with that relationship. However, the agency did not automatically attribute Tiuta’s knowledge to the fund for every purpose.
3. Alleged breaches. Eight of the nine allegations failed. The solicitor should have completed the certificate’s question concerning the last recorded sale or value of the property by referring to the £2,500,000 value stated on the register. The other matters did not require qualification. The solicitor was entitled to conclude that the relevant planning payment, lease restrictions, restrictive covenant, good leasehold title and sixth-floor arrangements did not prevent the relevant undertakings from being given with reasonable skill and care.
4. Reliance and causation. The fund relied on the certificate, but reliance alone was insufficient. Following Thomas v Allbutt [2015] PNLR, the court considered whether the transaction would have proceeded if the solicitor had acted as alleged. The breach concerning the £2,500,000 valuation caused no loss because the fund’s evidence showed that disclosure would not have caused rejection of the application. The other alleged breaches would not have caused loss either, since Tiuta would probably have resolved the matters and resubmitted an unqualified certificate.
5. Loss. The duty was informational, not advisory. The Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] 1 AC 191 limitation therefore applied. If liability and causation had been established, recoverable loss would have been limited to £70,000. The claim was dismissed.